Understanding the VA's Certificate of Reasonable Value

A Certificate of Reasonable Value (CRV) is a document issued by the Department of Veterans Affairs (VA) in the United States for properties purchased with a VA loan. The CRV is based on an appraisal conducted by a VA-approved appraiser and establishes the maximum value and loan amount for the VA mortgage. The purpose of the CRV is to ensure that veterans obtain mortgage financing that accurately reflects the property's market value, protecting both the borrower and the lender.

Key Takeaways

Key Aspects of The Certificate of Reasonable Value Include

1. 1. Determination of Value: The CRV determines the reasonable value of the purchased property or refinanced with a VA loan. This valuation is crucial because it sets a cap on the VA loan amount, ensuring that veterans do not overpay for properties and that the loans are secured by properties worth the investment.
2. 2. Appraisal Process: To issue a CRV, a VA-approved appraiser inspects the property to assess its condition, features, and comparables in the area. This comprehensive evaluation forms the basis of the property's valuation.
3. 3. Impact on VA Loan Amount: The value stated in the CRV directly affects the maximum loan amount that the VA will guarantee. If the purchase price of a property exceeds the value determined by the CRV, the borrower may choose to negotiate a lower price, pay the difference out of pocket, or withdraw from the transaction.
4. 4. Protection for Veterans: The CRV serves as a protective measure for veterans by ensuring they do not commit to a mortgage that exceeds the property's market value, potentially avoiding financial losses in the future.
5. 5. Validity Period: The CRV is valid for a certain period, typically six months, giving the buyer a window to complete the purchase using the appraised value.

Conclusion

The Certificate of Reasonable Value plays a critical role in the VA loan process, ensuring that the loans are based on a property's fair market value and helping to safeguard the financial interests of veterans and their families.

FAQs

1. What happens if the property I want to buy has a purchase price higher than the CRV?

Suppose the purchase price of a property exceeds its CRV. In that case, the buyer has a few options: negotiate a lower price with the seller, pay the difference between the loan amount and the purchase price out of pocket, or decide not to proceed.

2. Can I challenge the valuation if I believe the CRV is too low?

If you believe the CRV undervalues the property, you can request a Reconsideration of Value (ROV) through your lender. This process may involve providing additional comparable sales data or information about the property's condition that was not considered in the original appraisal.

3. Does the CRV affect refinancing a VA loan?

When refinancing a property with a VA loan, a new CRV may be required to ensure the refinanced amount does not exceed the property's current market value. This protects the lender and the borrower by aligning the loan amount with the property's value.