VA Lenders Handbook (VA Pamphlet 26-7), Chapter 13, Topic 8 — Notice of Value Conditions

VA Pamphlet 26-7, Chapter 13 (Notices of Value), Topic 8 — Notice of Value Conditions

Effective 2019-07-22 · VA Change Date for this topic

• This chapter has been revised in its entirety. a. NOV Conditions All conditions included on an NOV must be satisfied prior to guaranty of the loan by VA. b. Additional Lender Requirements While lenders may require additional documentation over and above VA requirements, often referred to as “lender overlays”, items that are not required by VA must not be included on the NOV. c. Table of NOV Conditions The following table lists the conditions that appear on the NOV form with details about when each condition is required on the NOV. The NOV letter format is provided in Appendix A at the end of this chapter. c. Table of NOV Conditions, continued NOV Condition Details for including this condition on an NOV 1. Energy Conservation Item 1a should be marked on NOVs for existing properties (over 1-year old or previously occupied) to allow lenders to increase the loan amount for Veterans wishing to make energy efficiency improvements (see Chapter 7 of this Handbook). Item 1b should be marked on NOVs for new or proposed construction excluding manufactured homes. For new and proposed manufactured homes, energy efficiency is already covered by the manufacturer’s guidelines (see Chapter 12, Topic 42 of this Handbook) so this item should not be marked. 2. Wood Destroying Insect Information If the property is located in an area on the Termite Infestation Probability Map where the probability of termite infestation is "very heavy" or "moderate to heavy," a wood destroying insect inspection report must be required on the Notice of Value (NOV). Mark 2a if the property is existing or new construction, or item 2b if the property is proposed. For new construction, if a soil treatment guarantee is provided, this is preferable and will satisfy condition 2a. The pest control operator must meet all state requirements. State-required inspection forms are acceptable. Inspection reports are valid for 90 days. Soil treatment guarantees differ from an inspection and are consequently valid well beyond 90 days. A wooddestroying insect inspection is not required on units in low-rise or high-rise condominiums (units are stacked vertically) unless the appraiser notes a potential infestation problem. For site condominiums, and villa or townhome style condominiums where units are not vertically stacked, an inspection must be required on the NOV unless evidence of a treatment guarantee has been provided by the homeowners association. c. Table of NOV Conditions, continued NOV Condition Details for including this condition on an NOV 3. Lien-Supported Assessment If the property is located in a planned unit development (PUD) or condominium, mandatory homeowners association fees must be shown on the NOV. Special assessments including local authorities collecting Community Development District (CDD) fees or other fees on the HOA’s behalf should be reported here as well. 4. Condominium If the condominium is conditionally accepted by VA, this item should be marked. This item is not required if the condominium is fully accepted by VA. If the condominium has not been accepted by VA, the NOV must not be issued. (See Chapter 11, Topic 12 of this Handbook). 5. Private Road/Shared Driveway If access to the property is by a private road or shared driveway, this item should be marked, unless the property is in a PUD or condominium with private streets which are covered by the organizational documents. If a state law establishes requirements for the maintenance of private roads, this condition is not needed on the NOV. 6. Flood Insurance If the property is located in a Special Flood Hazard Area, this item must be marked. It is the lender's responsibility to ensure that flood insurance is obtained and maintained on properties located in SFHAs, whether or not the appraiser correctly identifies the property as being in an SFHA. If flood insurance is not available, a property in a SFHA is not eligible to be the security for a VA-guaranteed loan. 7. Water/Sewage System Acceptability If the property has an individual water supply, such as a well, this condition must be marked. For proposed construction cases, acceptance of an individual sewage system must be required. Acceptance of the sewage system is also required for existing or new construction cases in which there is an indication of a problem or the property is in an area known to have soil percolation problems. Certifications are valid for 90 days unless the local authority indicates otherwise. c. Table of NOV Conditions, continued NOV Condition Details for including this condition on an NOV 8. Connection to Public Water and/or Public Sewer This condition is required only if the property does not have public water and/or sewer and the state or local authority has mandated connection to public utilities. 9. Repairs The repairs recommended on the appraisal should be reviewed and only those which are needed for the property to meet VA MPRs should be listed on the NOV. Any apparent defective conditions observed by the appraiser must be addressed by requiring correction, rather than an inspection. The completion of any repairs that could involve lead-based paint must be certified by the fee appraiser. 10. Post Construction Inspection This condition must be marked on all proposed construction properties and properties appraised subject to alterations such as a room addition. 11. New Construction Inspections/Warranty For new construction properties, either 11a or 11b must be required based on whether or not local building inspections are performed. Since new construction must have either a 1 year or a 10-year warranty, either 11c or 11d must be marked. 12. Proposed Construction Inspections/Warranty For proposed construction properties, either 12a or 12b must be required based on whether or not local building inspections are performed. Warranty requirements are determined accordingly. c. Table of NOV Conditions, continued NOV Condition Details for including this condition on an NOV 13. New or Proposed Manufactured Home If the subject is a new or proposed manufactured home, 13a or 13b must be required based on whether the local authority issues a certificate of occupancy. VA Form 26-8599, Manufactured Home Warranty, is provided by the manufacturer and the 1-year warranty is provided by the manufactured home installer who placed the home on the foundation. 14. Lead/Water Distribution System This condition must be required on all new or proposed construction properties, and on properties having repairs to the potable water distribution system. 15. Radon Gas This condition must be required on all new or proposed construction properties. 16. Other Conditions Any additional requirements should be listed in Item 16, for example, an unvented space heater (see Chapter 12, Topic 24 of this handbook), an airport safety zone (see Chapter 12, Topic 41 of this handbook), requirements for cisterns (see Chapter 12, Topic 17 of this handbook), stationary storage tanks containing flammable material (see Chapter 12, Topic 37 of this handbook), or any local requirements (see Chapter 12, Topic 1, Item h of this Handbook). Appendix A. Notice of Value Sample Letter Change Date July 22, 2019 • This chapter has been revised in its entirety. [Reminder: The NOV must be mailed or emailed to the Veteran on the date issued.] [on lender's letterhead] LENDER'S NOTICE OF VALUE [date NOV issued] [Veteran’s name] LENDER LOAN #: [Veteran’s current address] VA CASE #: [Veteran’s city, state, zip code] APPRAISAL REVIEWER: [SAR name, SAR id #] PROPERTY ADDRESS: [complete address] Dear [Mr. or Ms.] [Veteran’s last name]: The above property has been appraised by a fee appraiser assigned by the VA Regional Loan Center in [ RLC City and State]. On [date NOV issued], the VA-authorized appraisal reviewer personally reviewed the fee appraiser's report and determined the property's estimated reasonable value to be $[ value ]. The maximum repayment period for a loan secured by this property is [30 years or estimated remaining economic life on appraisal, whichever is less]. The VA appraisal was made to determine the reasonable value of the property for loan purposes. The appraisal must not be considered a building inspection. Neither VA nor the lender can guarantee that the home will be satisfactory to you in all respects or that all equipment will operate properly. A thorough inspection of the property by you or a reputable inspection firm may help minimize any problems that could arise after loan closing. In an existing home, particular attention should be given to plumbing, heating, electrical and roofing components. VA recommends testing for radon, which the government has determined can cause lung cancer. REMEMBER: VA GUARANTEES THE LOAN, NOT THE CONDITION OF THE PROPERTY The following marked conditions apply to this property: 1. ENERGY CONSERVATION. ( ) a. Existing property. You may wish to contact a qualified person/firm for a home energy audit to identify needed energy efficiency improvements to the property. In some localities, the utility company may perform this service. The mortgage amount may be increased as a result of making energy efficiency improvements such as: Solar or conventional heating/cooling systems, water heaters, insulation, weather-stripping/caulking, and storm windows/doors. Other energy related improvements may also be considered. ( ) b. New or proposed construction property. Builder's certification that this new dwelling was constructed to meet the energy conservation standards of the International Residential Code (IRC). 2. WOOD-DESTROYING INSECT INFORMATION. ( ) a. Inspection Report (Existing or New Construction). The property must be inspected by a qualified pest control operator using Form NPMA-33, or other VA-approved collection method. Any reported infestation or structural damage affecting the value of the property must be corrected to VA's satisfaction prior to loan settlement. You must acknowledge receipt of a copy of the inspection report in the space provided on the form. ( ) b. Soil Treatment Guarantee (Proposed Construction). Properly completed NPMA-99a and NPMA99b forms are required. The lender will provide you with a copy of these forms. 3. LIEN-SUPPORTED ASSESSMENT. ( ) a. Homeowner Association Fee. Estimated fee of $[0.00] per [period of time]. ( ) b. Other (Special Assessments, Assessments by local taxing authorities) 4. ( ) CONDOMINIUM. Evidence that the condominium project meets VA requirements. 5. ( ) PRIVATE ROAD/SHARED DRIVEWAY. Evidence that use of the private road/shared driveway is protected by a recorded permanent easement or recorded right-of-way from the property to a public road, and that a provision exists for its continued maintenance. 6. ( ) FLOOD INSURANCE. If improvements on this property are located in a FEMA Special Flood Hazard Area, flood insurance is required. The lender must verify flood zone information provided on an appraisal report. 7. WATER/SEWAGE SYSTEM ACCEPTABILITY. Evidence from the local health authority or other source authorized by VA that the individual ( ) water supply, and/or ( ) sewage disposal system(s) is/are acceptable. 8. CONNECTION TO ( ) PUBLIC WATER and/or ( ) PUBLIC SEWER. Required only when connection is mandated by a local authority. 9. ( ) REPAIRS. The ( ) lender ( ) fee appraiser (_________[insert name]__________) is to certify that the following repairs have been satisfactorily completed. ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ _______________________________________________________________ Important – please see the above second paragraph about your responsibility concerning the condition of the property. 10. ( ) POST CONSTRUCTION INSPECTION. The fee appraiser (_________[insert name]__________) must visit the property and certify that construction substantially complies with the certified construction exhibits on which the appraisal was based, or that the construction is in accordance with the model home and related information on which the appraisal was based, and that improvements comply with any conditions in the sales contract. 11. NEW CONSTRUCTION INSPECTIONS/WARRANTY. ( ) a. Provide copy of the Certificate of Occupancy (CO), or equivalent document, issued by a local building authority. or ( ) b. The local authority does not perform construction inspections. The lender is to certify that the property is complete (both on-site and off-site improvements) and that it meets VA MPRs for existing construction. The lender must obtain the Veteran’s written acknowledgement that the property was not inspected during construction. ( ) c. The builder must provide a 1-year VA builder’s warranty completed on VA Form 26-1859, Warranty of Completion of Construction. VA will provide assistance with construction complaints limited to defects in equipment, material, and workmanship reported during the 1-year builder's warranty period. or ( ) d. Provide evidence of enrollment in a 10-year insurance backed protection plan. VA will not assist with any construction complaints. 12. PROPOSED CONSTRUCTION INSPECTIONS/WARRANTY. ( ) a. Provide a copy of the Certificate of Occupancy (CO), or equivalent document, issued by the local building authority. The builder must provide a 1-year VA builder’s warranty completed on VA Form 26-1859, Warranty of Completion of Construction. VA will provide assistance with construction complaints limited to defects in equipment, material and workmanship reported during the one-year builder's warranty period. or ( ) b. The local authority does not perform construction inspections, therefore the property must be covered by both a 10-year insurance backed protection plan and a 1-year VA builder's warranty on VA Form 26-1859, Warranty of Completion of Construction. The lender is to certify that the property is complete (both on-site and off-site improvements) and that it meets VA MPRs for existing construction. VA will provide assistance with construction complaints limited to defects in equipment, material, and workmanship reported during the 1-year builder's warranty period only. The lender must obtain the Veteran’s written acknowledgement that the property was not inspected during construction. 13. NEW OR PROPOSED MANUFACTURED HOME. ( ) a. Provide a copy of the Certificate of Occupancy (CO), or equivalent document, issued by the local building authority. Provide the warranty on VA Form 26-8599, Manufactured Home Warranty, and a 1-year VA builder’s warranty on VA Form 26-1859, Warranty of Completion of Construction. VA will provide assistance with construction complaints limited to defects in equipment, material and workmanship reported during the one-year builder's warranty period. or ( ) b. The local authority does not perform construction inspections. The lender must provide evidence that the manufactured home has been installed on a permanent foundation. Provide warranty on VA Form 26-8599, Manufactured Home Warranty, and a 1-year VA builder’s warranty on VA Form 261859, Warranty of Completion of Construction. VA will provide assistance with construction complaints limited to defects in equipment, material, and workmanship reported during the 1-year builder's warranty period. The lender must obtain the Veteran’s written acknowledgement that the property was not inspected during the construction of the manufactured home foundation. 14. ( ) LEAD/WATER DISTRIBUTION SYSTEM. The builder's certification which identifies this dwelling and states that the solders and flux used in construction did not contain more than 0.2 percent lead and that the pipes and pipe fittings used did not contain more than 8.0 percent lead. 15. ( ) RADON GAS. Builder to certify that radon resistant construction techniques were used and construction meets local building codes and state regulations for radon control, where applicable. In the absence of any building codes, certification will be based upon IRC requirements. 16. OTHER CONDITIONS ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ______________________________ Expiration Date: (six months from date of appraisal). Sincerely, (WebLGY will automatically enter the name of the individual who logged into WebLGY with a password and issue the NOV).

Source: VA Pamphlet 26-7, Chapter 13 (Notices of Value), Topic 8 — Notice of Value Conditions · source URL · snapshot 7bf94e7ed62e01fb