The VA recently published Circular 26-22-13 (the Circular) clarifying when alternative valuation methods may be used for VA-guaranteed loans. The Circular, which went into effect on July 27, 2022, follows the VA’s temporary allowance of alternative valuation methods during the COVID-19 pandemic.
The Circular defines three alternative valuation methods – “Interior Appraisal,” “Exterior-only Appraisal,” and “Desktop Appraisal” – and provides an “appraisal assignment waterfall” to clarify for lenders when alternative valuation methods may be used. A chart with additional information about the appraisal assignment waterfall is included in the Circular’s Exhibit A.
The Circular also clarifies the procedures and required documents for lenders using alternative valuation methods, including the documentation required for appraisal reports. A checklist with the documents required for an appraisal report when the lender uses an Exterior-only Appraisal or a Desktop Appraisal is included in the Circular’s Exhibit B.