VA Handbook Chapter 11: Appraisal Report Explained in Plain English

Last reviewed: October 6, 2026
Primary source: VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 11: Appraisal Report, as revised in its entirety with Change Date February 22, 2019 (revision effective May 23, 2019 per VA Change 23). This is the current appraisal-report rulebook. One update sits on top of it: VA Circular 26-22-13 (July 27, 2022, effective until rescinded) lets VA accept exterior-only and desktop appraisals for certain purchase transactions, so the chapter’s Topic 3 statement that Forms 2055 and 1075 are for liquidation appraisals only is narrower than current practice. All 22 topic texts were verified against a complete verbatim copy linked in the Sources section.

How this post works: We go through Chapter 11 in the VA’s own order, all 22 topics. For each section: what the handbook says (with direct quotes in the blue boxes), what that means in plain English, and where lenders commonly add their own requirements on top of the handbook. This chapter is about the appraisal report, the document itself: what goes in it, how square footage is counted, how value is estimated, and the special appraisal types (liquidation, partial release, vacant land). The appraisal process, ordering the appraisal, the Notice of Value, Tidewater, and Reconsideration of Value, lives in Chapter 10, which I already published and linked below. The story boxes are illustrations based on situations I see in my pipeline. Names and identifying details are changed, and no story describes any one borrower’s file.

Read this first (the three sentences that matter most)

One: the appraisal report is not the appraiser’s personal opinion of what your home should be worth. It is a USPAP-compliant document that must contain specific items, from the lender’s name and the fee appraiser’s VA ID to a sketch, photographs, and a repair list, and only the VA-assigned appraiser may sign it. Two: the square footage that matters is the appraiser’s gross living area calculation, not the listing, not the county records, and not what the seller told you. Basements never count, converted garages count only when they meet three specific tests, and an ADU is never rolled into the main home’s living area. Three: value comes from closed comparable sales, preferably within 6 months and generally not more than 12, with market-derived adjustments only. Everything else in the chapter is detail around these three facts.

The rest of this article separates what VA actually requires from what individual lenders add on top. Now here is the whole chapter, in order.

Topic 1: Appraisal Reports

What this section says

Appraisers on VA’s fee panel are trained on VA’s appraisal requirements, so lenders may rely on them to have followed the guidelines without demanding extra statements or certifications (subsection b). And the people reviewing the reports, the lenders’ Staff Appraisal Reviewers, must know residential appraisal principles and VA’s specific report requirements (subsection c).

What that means

This topic sets the authority stack: national appraisal standards (USPAP) first, then VA’s handbook requirements, then VA circulars that update things between handbook revisions. When this article says “updated since the handbook,” that third layer is what changed. It also tells you the system is designed to trust the panel appraisers: your lender does not get to pile extra certifications onto the appraiser because they feel like it.

Where lenders add overlays

Lenders cannot make the appraiser jump through extra certification hoops per subsection b, but what they can do, and some do, is order their own internal review of the appraisal before the SAR signs off on the NOV. That is a lender business practice, not a VA requirement, and it can add days. If your appraisal is done and the NOV is sitting with the lender, ask whether it is in SAR review or in the lender’s own queue. Those are two different waiting rooms.

Topic 2: Market Value

What this section says

VA’s definition matches the one used by Fannie Mae, Freddie Mac, and the major appraisal organizations. And the chapter draws a hard line on pressure:

What that means

Market value and reasonable value are the same thing in VA’s world. The definition is the industry-standard one: what a knowledgeable buyer and seller would agree on in an open market, with no undue pressure. And subsection c is VA saying the quiet part out loud: an appraisal engineered to hit the contract price is not an appraisal. It is unacceptable, full stop.

Where lenders add overlays

None on the definition itself, but here is the practical tension I see in my pipeline. Everyone in the transaction wants the value to hit the price. The appraiser is the one party whose handbook orders them not to care about the price. When a value comes in low, the instinct is to suspect the appraiser was sloppy. Sometimes they are. But most of the time the gap is explained by this chapter: the comps, the GLA math, and the market-derived adjustments. Attack the data, not the appraiser.

Topic 3: Appraisal Report Contents

What this section says

The report has nine required components, in this order:

• Invoice. For consistency, the first page of the PDF uploaded into WebLGY.
• Appraisal form. The lender’s name and “Department of Veterans Affairs” go in the Lender/Client field. The VA-assigned fee appraiser signs the signature block with their VA ID in the “other” block below the state license information. Accepted forms: Fannie Mae Form 1004 (URAR), Form 2055 (exterior-only) for liquidation appraisals only when interior access was not provided, Form 1004C (manufactured home), Form 1073 (condo unit), Form 1075 (exterior-only condo) for liquidation appraisals only when interior access was not provided, Form 1025 (small residential income property), and a commercially available vacant land form for liquidation appraisals where the improvements have no contributory value.
• Street map. Showing the subject and each comparable sale, plus extra maps if sales are far from the subject.
• Building sketch. Gross living area calculations, exterior dimensions, floor plan layout (interior room dimensions not required). Not required on liquidation appraisals where interior access was not provided.
• Photographs. Clear and labeled: front and rear at opposite angles, improvements with contributory value, MPR repair items, street scene, value-affecting views, kitchen, main living area, bathrooms, recent updates or renovations, front view of each comparable (marketing photos acceptable with explanation), and for condos in the same building, a comment can substitute for comp photos.
• Repair list. Itemized list of observed MPR repairs or customer preference items on new construction.
• Uniform Appraisal Dataset (UAD). Property condition and quality rating definitions and description abbreviations.
• Appraiser’s certifications. Only what state law or continuing-education/membership requires, on a separate page if needed, and nothing that conflicts with the report’s preprinted language or VA requirements.
• Liquidation appraisal addendum. Required on liquidation appraisals only (Topic 20).

What that means

This is the packing list for every VA appraisal report. Two details matter for borrowers. First, the lender’s name and “Department of Veterans Affairs” both appear as the client, which is a reminder that the appraisal serves VA and the veteran, not just the lender who ordered it. Second, the photo and sketch requirements are why the appraiser needs real access to the property. No interior access, no interior photos, no sketch. On a standard purchase appraisal, that is not optional.

Where lenders add overlays

Lenders cannot add forms or required exhibits beyond this list, but they do sometimes ask the appraiser for extra photos or commentary as a “revision request” when the SAR or an internal reviewer wants something clarified. That is normal and not an overlay. What crosses the line is a lender refusing to accept a compliant report and demanding the appraiser redo work the handbook does not require. If your file is stalled on appraisal revisions, ask your loan officer exactly which VA requirement the revision is tied to.

Topic 4: Gross Living Area

What this section says

Then the rules that surprise people:

Finished attics may be included. Non-contiguous areas (a detached finished space not connected to the main living area, for example) are valued separately on the market data grid. And for partially below-grade space, the appraiser decides: if it is like the GLA in design, quality, and appeal, has full utility, and the market accepts it, it can count. If it is inferior and the market does not accept it, it does not count, and its contributory value is listed separately.

What that means

This is the topic behind most “the square footage changed” surprises. Every word in the definition is a test: finished, habitable, contiguous, above-grade, residential. A finished basement fails “above-grade,” so it never counts in GLA, no matter how nice it is. It still has value, it just gets valued on its own line. A finished attic passes, so it can count. A partially below-grade level is the appraiser’s judgment call based on quality and what the local market accepts.

Where lenders add overlays

Lenders do not get to redefine GLA, but here is what I see in my pipeline: purchase contracts and listing sheets routinely cite square footage from county records or the seller, and those numbers often include finished basements or non-conforming additions. The appraisal then comes in with a smaller GLA, the comps shift, and the value follows. That is not the appraiser being difficult. That is this topic. Before you make an offer, compare the listing’s square footage against what is actually above grade. If the difference is a finished basement, price the home accordingly.

Topic 5: Room Additions and Car Storage Conversions

What this section says

A room addition or an enclosed garage or carport counts in the GLA only if all three are true:

• it is accessible from the interior of the main dwelling in a functional manner,
• it has a permanent and sufficient heat source, and
• it is similar in design, quality of construction, and appeal to the main dwelling.

Added space that fails any of the three is valued separately from the GLA on the market data grid, and the appraiser must consider the effect on marketability of an inferior addition when adjusting for it. The appraiser should also weigh differences in quality and utility between additions or conversions and originally constructed space when selecting and analyzing comparable sales.

What that means

The enclosed garage with a space heater and a door cut through the laundry room does not count as living area. The professionally finished addition with a heat run tied into the furnace, matching siding and trim, and a real doorway does. The three tests are functional access, real heat, and matching quality. Miss one, and the space is valued on its own line, usually for less than true GLA.

Where lenders add overlays

Some lenders treat unpermitted additions with extra suspicion and will ask for permits or a certification that the work meets code. That is a lender overlay, not a VA rule: the handbook’s test is about access, heat, and quality, not permits. But practically, if the addition has no permits, expect the lender’s underwriter to ask questions the appraiser did not. And one more pipeline reality: inferior conversions can hurt marketability beyond their own line-item adjustment. An appraiser who sees a chopped-up garage conversion may also adjust the overall appeal of the home. Budget for that possibility when you are buying a house with a DIY addition.

Topic 6: Accessory Dwelling Unit

What this section says

The appraiser must decide, as part of the highest and best use analysis, whether the property is a single-family home with an ADU or actually a two-family dwelling, and the use must be legal. A true two-family goes on Form 1025, not Form 1004. Key rule:

The appraiser must notify the lender if there is more than one ADU. And a detached building without kitchen, sleeping, and bathroom facilities, or one that cannot legally be used as a dwelling, is not an ADU at all: it may be valued as storage space if it presents no health or safety issues.

What that means

An in-law suite, a garage apartment, a backyard cottage with its own kitchen and bath: VA knows what these are and has a rule for them. The ADU does not inflate the main home’s square footage. It gets its own line on the appraisal grid. The classification question matters too: one ADU on a single-family lot is one thing, but if the setup walks and talks like a duplex, the appraiser must call it a two-family dwelling and use the income-property form. And the use must be legal, meaning zoning and local rules still apply.

Where lenders add overlays

This is an appraisal chapter, not an underwriting chapter, so one important boundary: this topic says nothing about counting ADU rental income toward your qualifying income. That is a Chapter 4 underwriting question, and it is a hard one. Do not assume the rent from the ADU helps you qualify. Many lenders will not count it, and the treatment depends on how the property is classified and documented. On the appraisal side, the overlay I see is simpler: some lenders get nervous about any property with an ADU and add their own review or condition the loan on the ADU being clearly legal and permitted. Ask your lender their ADU policy before you fall in love with the guest house.

Topic 7: Nuisances

What this section says

Nuisances do not make a property ineligible and do not require repair, but the appraiser must describe them and consider any effect on value. If comparable sales influenced by the same nuisance are available, the appraiser should use them. The handbook’s examples: “heavy traffic, noise from a nearby highway, or odors from a factory in the vicinity.”

What that means

Living next to the interstate does not kill your VA loan. It just means the appraiser has to account for it honestly. The best evidence is other homes near the same nuisance that sold anyway, because those sales show what the market actually discounts for the noise or the smell. This is VA being realistic: the home is financeable, but the value reflects the location.

Where lenders add overlays

Lenders generally follow the handbook here, but I have seen underwriters get conservative on severe nuisances, like properties backing directly to active rail lines or industrial sites, and ask the appraiser for additional commentary or comps. That is the lender protecting its own risk, and it can slow the file. If the property has an obvious nuisance, it helps to have your agent pull a couple of nearby sales with the same influence before the appraisal, so the data is ready if the appraiser or the underwriter asks.

Topic 8: Remaining Economic Life

What this section says

Remaining economic life is the estimated time until the improvements will no longer serve as a home. The appraiser weighs the neighborhood’s economic stability, comparable homes, the need for that type of home, the design and functional utility, the condition and durability, area maintenance levels, and any municipal code enforcement efforts. Then:

The number goes in the cost approach section, or in the Reconciliation section for condos.

What that means

This is the appraiser’s estimate of how many more years the house has left as a livable home. Thirty years is the tripwire: below that, the appraiser must explain themselves in writing. A well-kept 60-year-old brick ranch in a stable neighborhood can easily clear it. A deteriorating property in a declining area might not.

Where lenders add overlays

The handbook only requires the number and the comments, but lenders read this number as a risk signal. If the remaining economic life comes in under the loan term, expect the underwriter to ask hard questions, and some lenders will decline the loan outright rather than finance a home the appraiser says may not outlast the mortgage. This rarely comes up on typical purchases, but on very old or distressed properties it can be the quiet reason a file dies. If you are buying an older home, the property’s condition and the neighborhood trend matter for more than just the value.

Topic 9: Effective Age

What this section says

Actual age is years since construction. Effective age reflects condition and functional utility: remodeling usually lowers it, and neglect can raise it above the actual age. The appraiser states it as a single number and must comment if it differs significantly from the actual age. One more rule: because origination appraisals include recommended repairs in the value, the effective age should reflect the property as repaired.

What that means

A 1970 home with a 2020 gut renovation can appraise with an effective age of 10 years. A 2005 home with a failing roof and original everything can appraise older than its birth certificate says. And the “as repaired” rule matters: the appraiser does not get to call the home a wreck when the NOV is already conditioning the loan on the repairs being completed. The effective age assumes the MPR repairs happen.

Where lenders add overlays

Little direct overlay here, but effective age feeds the lender’s view of the file. A big gap between actual and effective age in the wrong direction, an old home appraised as old, can trigger the same underwriter scrutiny as a low remaining economic life number. On the flip side, a renovated older home with a young effective age supports the value. If the seller renovated, make sure the appraiser sees the receipts and permits: the effective age is the appraiser’s judgment, and documentation helps.

Topic 10: Highest and Best Use

What this section says

And the VA-specific limit:

What that means

Highest and best use is standard appraisal theory: what is the most valuable legal, feasible use of this property? But VA puts a fence around it. Even if the property would be worth more as a commercial lot, a working farm, or a future subdivision, the VA appraisal gives zero value to non-residential uses. The VA loan is a residential benefit, and the appraisal stays in that lane.

Where lenders add overlays

This topic is why some mixed-use or commercially-zoned properties die in VA underwriting even when the home itself is fine. If the highest and best use analysis suggests the property’s real value is commercial, the lender may walk, because the residential value alone may not support the loan. If you are buying a home on commercially zoned land or with a storefront attached, have the zoning conversation with your lender before the appraisal, not after.

Topic 11: Farm Residences

What this section says

VA sets no limit on acreage, and appraising acreage should be straightforward when similar residential-use properties sold recently in the area. The appraiser values barns, corrals, and stables only for their contribution to the property’s residential market value, and gives no value to livestock, crops, or farm equipment.

What that means

You can buy a house on acreage with a barn using your VA loan. You cannot buy a farm as a business. The appraisal treats the whole thing as a residence that happens to sit on land with outbuildings. The barn counts for what it adds to the home’s residential value. The tractor, the cattle, and the corn do not count at all.

Where lenders add overlays

This is one of the most overlay-heavy corners of VA lending. Many lenders cap acreage themselves, commonly at 5, 10, or 20 acres, even though VA sets no limit. Others will not touch any property with significant outbuildings or agricultural activity, regardless of the handbook. If you are buying acreage, the lender’s acreage and outbuilding policy is the first question to ask, before the property, before the offer, before anything. The VA rule is generous. Many lenders are not.

Topic 12: Condominiums

What this section says

The chapter then closes doors you might hope are open:

Condo-hotels (units in a rental pool) and “air” condominiums with no homeowners association are not eligible. The VA-accepted condo list lives on the VA portal (the handbook points to the VIP portal’s Condo Reports). To get a development accepted, the lender uploads the declaration, bylaws, amendments, plat map, rules, meeting minutes, budget, special assessment letter, litigation letter, presale letter, and anything else, in that stacking order, and VA’s legal counsel reviews them. Most condo appraisals go on Form 1073. New developments need 70 percent pre-sales on the NOV before guaranty. And on termite inspections: not required for stacked low-rise or high-rise units unless the appraiser notes a possible infestation; for side-by-side site condos and townhome-style units in heavy termite zones, the NOV must require one unless the HOA provides a treatment guarantee.

What that means

Condo buyers have homework the handbook makes non-negotiable. Before anyone orders an appraisal, check whether VA has accepted the development. The SAR legally cannot issue the NOV without at least conditional acceptance, so an appraisal on an unaccepted condo is money spent for nothing. FHA approval does not count. Approving just your unit does not exist. The whole development goes through VA’s legal review, or there is no VA loan.

Where lenders add overlays

Lenders are often stricter than the handbook on condos. Many will not order the appraisal until VA acceptance is final, not just conditional. Some maintain their own approved condo lists on top of VA’s. And on the document side, if the HOA is slow producing budgets, meeting minutes, or the litigation letter, the lender may stall the file rather than push VA for conditional acceptance. If you are buying a condo, ask your lender on day one: is this development on VA’s accepted list, and what is your policy if it is not? That one question saves more VA condo deals than anything else I do.

Topic 13: Uniform Appraisal Dataset

What this section says

The UAD standardizes appraisal data: field formats, allowed values, abbreviations, and the condition and quality ratings. Appraisals on Forms 1004, 1073, 1075, and 2055 must be UAD-compliant and include the rating definitions and abbreviations used. Then two VA-specific rules:

The UAD also requires 15 years of remodeling history, which the appraiser reports as available in the normal course of business within VA’s timeliness requirements.

What that means

UAD is the shared language of appraisals: C1 through C6 condition ratings, Q1 through Q6 quality ratings, standard abbreviations. Two VA twists: only closed sales count as comps (pending sales are out, even though the UAD format allows them), and a purchase appraisal can never carry the worst condition ratings, because it is always written “subject to” the repairs being completed. A C5 or C6 rating would mean the home is being valued as a teardown in its current state, which contradicts the “subject to repairs” premise.

Where lenders add overlays

Mostly this topic runs itself, but the “closed sales only” rule is where I see friction. Agents love to submit pending sales as Tidewater data or ROV support, because pendings show where the market is heading. VA does not care. The handbook says closed sales, and the appraiser must follow it. If your agent’s best evidence is three pendings, find closed sales too, or the data goes nowhere.

Topic 14: Sales Comparison Approach

What this section says

This is the longest topic in the chapter, and it is the engine of the value. The rules:

• At least three closed sales, the best available, selected for similar location and physical characteristics, not for sales price. Recent sales in the same subdivision, condo, or PUD are typically the best indicators. The comps should be properties that would compete with the subject if all were on the market at once.
• Explain the adjustments. Comment when adjustments are not self-explanatory or are large. Good commentary reduces revision requests.
• No distance rules. VA sets no minimum or maximum distance. In rural areas, comps can be many miles away, but the appraiser must explain why those sales were used.
• REO and short sales may be used if they are prevalent in the market, but a foreclosure transfer to a servicer is not market value and must not be used as a comp.
• Adjustments are market-derived, reflecting what a typical buyer would pay, not the cost of the item. Contributory value and cost are not the same thing.
• Sales concessions adjust down only. The adjustment is the difference between the price with concessions and what the property would have sold for without them. Positive adjustments for concessions are not acceptable.
• Recency: comps should reflect the most recent market activity, preferably within the last 6 months and generally not more than 12 months old, unless the appraiser explains.
• Time adjustments reflect market movement between the comp’s contract date and the appraisal’s effective date, with commentary on current trends supporting them.
• Condition adjustments compare the subject as repaired against the comps, since the appraisal is “subject to” the MPR repairs being completed.

What that means

This topic is the entire valuation in one place. Three closed sales, similar homes, recent dates, adjusted for real market differences. The adjustments are where appraisals are won and lost: every dollar of adjustment has to reflect what the market actually pays for that feature, not what it cost to install. And the condition rule is subtle but important. The subject is compared to the comps in its repaired state, because the loan is conditioned on the repairs. The appraiser is valuing the home you will actually get, not the home with the peeling paint and the broken step.

Where lenders add overlays

Lenders cannot rewrite these comp rules, but many add their own comp guidelines on top: distance limits, age limits tighter than the handbook’s, or requirements for an extra comp when adjustments are large. Those are lender overlays, and they usually surface as appraisal revision requests or, worse, as a second review that questions the appraiser’s judgment. When a file stalls on “the investor wants another comp,” that is the overlay talking, not VA. Ask your lender upfront what their comp guidelines require beyond the handbook, especially on rural properties where the handbook’s flexibility is the whole ballgame.

Topic 15: Cost Approach

What this section says

If the appraiser does complete it, the site value must be estimated through sales comparison, allocation, or extraction. If the cost approach is not completed, no site value is provided.

What that means

The cost approach (land value plus construction cost minus depreciation) is optional on a VA appraisal. The sales comparison approach in Topic 14 does the heavy lifting. When the cost approach appears, it is a supporting actor, not the star. And there is a small trap in subsection b: if the appraiser skips the cost approach, they do not provide a site value at all, so do not go hunting for one in the report.

Where lenders add overlays

Some lenders and investors require the cost approach even though VA does not, particularly on new construction or unique properties. That is an overlay, and it can add time if the appraiser has to go back and develop it. On a standard existing-home purchase, its absence means nothing about the quality of the appraisal.

Topic 16: Income Approach

What this section says

What that means

Two to four units: income approach required, on the 1025 form. Everything else: not required. Your single-family home’s appraisal does not need a rent analysis, and its absence is not a defect in the report. This pairs with Topic 6: if the appraiser classifies the property as a true two-family dwelling rather than a single-family home with an ADU, the 1025 and its income approach come into play.

Where lenders add overlays

On multi-unit purchases, lenders lean hard on the 1025’s rent figures for underwriting (that is Chapter 4 territory), and some will question the appraiser’s market rents if they look soft. That pressure belongs in underwriting, not in the appraisal, but in practice the two bleed together. If you are buying a duplex with a VA loan, expect the income section of the appraisal to get more scrutiny than anything else in the report.

Topic 17: Final Reconciliation

What this section says

In the final reconciliation, the appraiser evaluates and summarizes the approaches to value included in the report. And the handbook tells you how that summary almost always lands:

What that means

Reconciliation is the appraiser’s closing argument: of the approaches developed, which one gets the weight, and why. On a typical VA appraisal, only the sales comparison approach was developed, so it carries the value by default. This topic exists to stop anyone from treating an optional cost approach as an equal vote. The market approach is the value.

Where lenders add overlays

None here. The practical note is for anyone challenging a value: your Tidewater data and your ROV argument should attack the sales comparison approach, because that is where the value lives. Arguing that the home would cost more to rebuild is arguing the cost approach, which the handbook just told you does not control the outcome.

Topic 18: Appraisal Conditions

What this section says

Three possible conditions, and the appraiser picks based on what they found:

• As-is: the property meets MPRs on an origination appraisal, or the assignment is a liquidation appraisal (Topic 20).
• Subject to repairs or alterations: on a hypothetical condition that the repairs are completed. This applies when the appraiser recommends MPR repairs on an origination appraisal, when customer preference items must be completed on new construction, or when alterations are being made.
• Subject to completion per plans and specifications: for proposed construction.

And the rule that defines the appraiser’s job on repairs:

What that means

“Subject to” is the normal state of a VA purchase appraisal with repair items: the value assumes the repairs get done, and the NOV will condition the loan on them. “As-is” means the appraiser found nothing to fix, or it is a liquidation appraisal where nobody is fixing anything. The last rule is a protection for you: the appraiser cannot punt with “have it inspected.” If it fails MPRs, they must say what repair is needed. Vague inspection demands are not allowed.

Where lenders add overlays

Lenders add inspection requirements on top of this all the time, and that is where the confusion starts. The appraiser says “repair the handrail.” The lender’s underwriter says “we also want a licensed contractor’s letter.” The contractor letter is the lender’s overlay, not the appraiser’s requirement, and it is usually non-negotiable once the underwriter asks. The handbook gives you the floor (the appraiser must name the repair). The lender builds the ceiling. When repair conditions multiply, ask which ones came from the appraisal and which came from underwriting, so you know who can waive what.

Topic 19: Appraiser Training a New Appraiser

What this section says

VA supports panel appraisers training the next generation. Trainees may accompany the assigned appraiser to the property and may help with any part of the appraisal, but the value analysis must be done by the VA-assigned fee appraiser: selecting the comps, performing the critical analyses, and preparing the Market Conditions Addendum. If a trainee helped, the report must name them and describe their role. And:

What that means

If two people show up to your appraisal inspection, the second one is probably a trainee, and that is fine and expressly allowed. What is not allowed is the trainee doing the valuation while the panel appraiser just signs. The comp selection, the analysis, and the market conditions work must be the assigned appraiser’s own, and their signature is the only one that counts.

Where lenders add overlays

None. The borrower takeaway is simple: do not be alarmed by the extra person, and do not try to influence either of them. VA’s rotation and assignment rules (Chapter 10) plus this topic’s signature rule are the system’s answer to appraisal pressure. Let them do their jobs.

Topic 20: Liquidation Appraisals

What this section says

When a VA loan is in default, the servicer should request a liquidation appraisal no later than 30 days before the estimated or scheduled sale date. The turnaround is 5 business days. The servicer must help the appraiser get inside: for occupied properties, provide the occupant’s name and number; for vacant properties, provide keys or a contact who can grant access promptly.

Access rules are specific. Occupied: the appraiser must get inside unless the occupant permanently refused, access presents a legitimate hazard, at least one visit plus two or more calls on different days and times failed, or three broken appointments. Vacant: the appraiser must get inside unless the law prohibits it and the RLC waived access, the RLC waived it for extenuating circumstances, or the RLC approved waiving the servicer’s duty to help. If access fails anyway, the appraiser verifies the interior by the best available means (listings, assessment records) and makes reasonable assumptions about condition, MPR repairs, and cosmetic repairs.

The value is as-is, and it is the same market value definition as an origination appraisal, not a discounted or forced-sale value. A property needing no repairs should appraise the same on a liquidation appraisal as on an origination appraisal. The required addendum covers: occupied or vacant, whether interior access was gained (with access-attempt details if not), whether a vacant property was secure, urgently needed repairs (securing the dwelling, securing a pool), three current listings or pending sales with days on market, price, price changes, and a comparison to the subject, and an itemized list of MPR and cosmetic repairs with estimated cost and contributory value for each.

What that means

A liquidation appraisal is the valuation VA uses when a loan has gone to default and a foreclosure sale is approaching. Two things about it surprise people. First, it is not a fire-sale number: the handbook insists on the same market value definition, so a well-kept home appraises the same as it would for a purchase. Second, the access rules are aggressive. The servicer has to make real efforts to get the appraiser inside, and the appraiser has to document every failed attempt. This topic exists because VA needs a reliable value to decide what to do with the defaulted loan, and a drive-by guess is not reliable enough.

Where lenders add overlays

This topic governs servicers more than originating lenders, so overlays are rare. The practical note is for anyone in default: cooperate with the access attempts. A liquidation appraisal done without interior access relies on assumptions, and assumptions in a distressed valuation rarely favor the homeowner. If the servicer calls about appraisal access, take the appointment.

Topic 21: Partial Release Appraisals

What this section says

When part of the mortgaged property is being released from the lien, for a sale of a parcel, a public taking, or a conservation designation, for example, VA assigns the appraiser. The servicer emails the request to the Regional Loan Center of jurisdiction. Critically:

The email request must include the servicer’s name, address, and email, the VA case number, the property address, the owner’s name and contact number for access, a plot plan or survey showing the proposed partition, identification of the remaining parcel, legal descriptions for each parcel, the reason for the release, and confirmation that the appraisal fee will be paid on completion. The fee is not fixed: VA sets it case by case after consulting the appraiser. The RLC assigns a panel appraiser outside of WebLGY with instructions. The report gives two values:

The appraiser emails the invoice and report to the RLC, VA staff reviews it, and the RLC sends the servicer the invoice, the appraisal, and a memo with both value estimates, with a copy to the Loan Administration Officer.

What that means

If you want to sell off part of your land, or the county is taking a strip for a road, and your VA loan’s lien covers the whole property, this is the process. It runs on email to the RLC, not through the normal appraisal ordering system, because it is a servicing action, not an origination. VA needs to know the remaining property still secures the loan adequately, which is why the report values both the whole and the remainder.

Where lenders add overlays

The servicer is the gatekeeper here, and servicers add their own partial-release policies on top of VA’s: minimum remaining loan-to-value ratios, their own fees, and their own timelines. VA’s chapter just describes the appraisal. The servicer’s decision to grant the release is a separate business call. If you are considering selling part of your property, start with your servicer’s partial release department, not with VA directly, and get their requirements in writing before you spend money on surveys.

Topic 22: Vacant Land Appraisals

What this section says

A vacant land appraisal may be needed for a liquidation appraisal when there are no improvements on the land or the improvements have no contributory value. The appraiser provides a written narrative or a commercially available vacant land form, meeting USPAP, and the report must include: property address, legal description, owner of record, assessment and tax information, property rights appraised, site size, zoning, highest and best use, shape, topography, drainage, utility availability, flood zone information, the estimated cost of razing any worthless improvements (considered in the market approach), a comparable sales grid with three adjusted sales indicating market value, and the assumptions, limiting conditions, and certifications.

What that means

VA does not do land loans for veterans buying vacant lots, so this topic exists almost entirely for the liquidation world: defaulted loans where the collateral is effectively just land. The required contents are the full land-appraisal checklist, because with no house to value, the land analysis is the entire appraisal. Note the highest and best use item appears here too, carrying the same residential-only limit from Topic 10.

Where lenders add overlays

None, realistically. If you are a veteran hoping to buy vacant land with a VA loan, the honest answer is that the program does not work that way: VA guarantees loans for homes, and this chapter’s vacant land appraisal is a servicing tool, not a purchase path. A construction loan that converts to a VA loan after the home is built is the route some veterans take, and that appraisal is a proposed-construction appraisal (Chapter 10, Topics 12 and 13), not this one.

Frequently asked questions

These are the questions Chapter 11 itself answers: what goes in the appraisal report, how square footage is counted, how the appraiser estimates value, and what the special appraisal types are. If your question is about your specific situation, the quiz link above is the fastest way to get an answer.

What is the difference between Chapter 10 and Chapter 11?

Chapter 10 is the appraisal process: ordering the appraisal, how VA assigns the appraiser, the Notice of Value, Tidewater, and Reconsideration of Value. Chapter 11 is the appraisal report: the document itself. What forms are accepted, what must be in the report, how gross living area is calculated, how the appraiser picks comps and estimates value, and the special appraisal types for liquidation, partial release, and vacant land.

Who actually writes the appraisal report, and who signs it?

The VA-assigned fee panel appraiser writes it and is the only person who may sign it (Topics 1 and 19). A trainee may accompany the appraiser and help with parts of the work, but the comp selection, the critical analyses, and the Market Conditions Addendum must be the assigned appraiser’s own work, and any trainee help must be disclosed in the report with the trainee’s name and role.

What appraisal forms does VA accept?

Fannie Mae Form 1004 (the standard URAR), Form 2055 (exterior-only), Form 1004C (manufactured home), Form 1073 (individual condo unit), Form 1075 (exterior-only condo), Form 1025 (small residential income property, 2 to 4 units), and a commercially available vacant land form (Topic 3). The lender’s name and “Department of Veterans Affairs” both go in the Lender/Client field, and the appraiser’s VA ID goes in the “other” block below the license information.

Does a finished basement count in the square footage?

No. Basements, finished or not, are never included in gross living area (Topic 4). They still have contributory value and are listed separately on the market data grid, but the GLA number is above-grade space only. If a listing’s square footage includes the finished basement, the appraisal’s GLA will be smaller, and that is correct.

Does a converted garage count as living area?

Only if it passes all three tests in Topic 5: functional interior access from the main dwelling, a permanent and sufficient heat source, and design, quality, and appeal similar to the main dwelling. A garage with drywall and a space heater fails. Space that fails any test is valued separately from the GLA.

We have an in-law suite. Does it count in the square footage?

No. An accessory dwelling unit is never included in the primary dwelling’s GLA. It is valued as its own line item on the market data grid (Topic 6). The appraiser must also decide whether the property is a single-family home with an ADU or actually a two-family dwelling, which changes the form to the 1025, and the ADU’s use must be legal.

What does “subject to” mean on a VA appraisal?

It means the value assumes something will happen: usually that the MPR repairs the appraiser listed will be completed (Topic 18). The appraisal is “as-is” only when the property already meets MPRs or when it is a liquidation appraisal. One protection built into the rule: when something fails MPRs, the appraiser must recommend a specific repair, not just call for an inspection.

Can the appraisal be ordered before the condo development is VA-approved?

Technically someone could order it, but the SAR cannot issue the NOV until the development is at least conditionally accepted by VA, so the appraisal would be useless (Topic 12). Check VA’s accepted condo list before the appraisal is ordered. FHA approval does not count, and VA does not do “spot” approvals of individual units.

What is a liquidation appraisal?

The appraisal VA uses when a loan is in default and a foreclosure sale is approaching (Topic 20). The servicer should order it at least 30 days before the sale date, the turnaround is 5 business days, and the value is as-is market value, not a discounted fire-sale number. There is no borrower on the report, so the appraiser enters “n/a” in the Borrower field.

What is a partial release appraisal?

The appraisal used when part of the mortgaged property is being released from the lien, such as selling off acreage (Topic 21). It is requested by email to the Regional Loan Center, never through WebLGY or Form 26-1805, and the report gives two values: the whole property before the release and the remaining property that will secure the loan after it.

Does the cost approach or income approach affect my appraisal value?

On a typical single-family purchase, no. The cost approach is optional for VA, and the income approach is required only on 2 to 4 unit properties (Topics 15 and 16). The final reconciliation (Topic 17) says the sales comparison approach will likely reflect the final value. Challenge the comps, not the cost approach, if you dispute the value.

The appraiser’s comps seem wrong. What can be done?

The comp rules are in Topic 14: at least three closed sales, similar location and physical traits, preferably within 6 months and generally not more than 12, with market-derived adjustments. If you have better closed sales, they can be submitted through the Tidewater Procedure before the appraisal is finished or through a Reconsideration of Value after the NOV, both covered in Chapter 10. What does not work: pending sales, foreclosure transfers to a servicer, or asking for a second appraisal.

Related reading

Chapter 11 is the appraisal report rulebook. These guides cover the pieces around it:

• VA Handbook Chapter 10: Appraisal Process, Explained in Plain English: ordering the appraisal, the Notice of Value, Tidewater, and Reconsideration of Value, the process side of what this chapter documents.
• VA Handbook Chapter 12: Minimum Property Requirements, Explained in Plain English: the property condition rules behind every “subject to” appraisal and every repair list in the report.
• VA Handbook Chapter 4: Credit Underwriting, Explained in Plain English: the income, credit, and residual-income standards your file still has to meet after the appraisal clears, including how rental income is treated.
• VA Handbook Chapter 6: Refinancing Loans, Explained in Plain English: when a refinance needs an appraisal and when it does not.
• VA Handbook Chapter 2: Veteran’s Eligibility and Entitlement, Explained in Plain English: the Certificate of Eligibility that starts the whole chain.
• VA Handbook Chapter 3: The VA Loan and Guaranty, Explained in Plain English: how the appraisal’s value connects to the guaranty and your entitlement.

Sources

• VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 11: Appraisal Report. Chapter text verified against a complete verbatim copy of the revised chapter (all 22 topics, each carrying Change Date February 22, 2019, “This chapter has been revised in its entirety”): https://patriotpacificmlo.com/wp-content/uploads/2023/01/Chapter_11_Appraisal_Report.pdf. The official chapter title (“Appraisal Report”) and all 22 official topic names come from the chapter’s own overview table. KnowVA (VA’s official knowledge base) was not used: it is JavaScript-gated and does not yield chapter text to text fetching.
• VA Circular 26-22-13, “Department of Veterans Affairs (VA) Appraisal Waterfall,” July 27, 2022 (effective until rescinded): https://benefits.va.gov/HOMELOANS/documents/circulars/26_22_13.pdf. Authorizes exterior-only and desktop appraisals for certain purchase transactions, which widens the 2019 chapter’s Topic 3 limitation of Forms 2055 and 1075 to liquidation appraisals. Also authorizes the actual cost of third-party data platforms as a chargeable fee. The circular’s conditions (LAPP-approved lender, price at or below the conforming loan limit, one-unit single-family residence that is not a manufactured home or condo, not a leasehold, not under renovation, and either 20 percent down or 7+ business days unassigned) are from the circular itself.
• VA’s 2023 SAR Training materials (benefits.va.gov) corroborate the Topic 3 contents list (invoice, appraisal form, street map, building sketch, photographs, repair list, UAD, appraiser’s certifications, liquidation addendum) and the Topic 3/12/14/18 form and content rules: https://www.benefits.va.gov/HOMELOANS/documents/conf/2023-sar-training.pdf.
• Notes on currency: the February 2019 chapter revision (effective May 23, 2019, per VA Change 23 as reported by TENA) predates Circular 26-22-13 (2022); where they conflict, this article follows the circular. The 2026 MPR changes reported in the press (fireplaces, radon, detached structures, post-1978 peeling paint) concern Chapter 12, not this chapter. No VA circular or change transmittal superseding the ADU, farm residence, liquidation, partial release, or vacant land topics was found. The chapter’s reference to the VIP portal condo list URL was not independently verified as current.

I am a mortgage loan originator, not the VA. This article walks through the VA Lenders Handbook as of the last-reviewed date above. Story illustrations are based on situations I see in my pipeline, and no story describes any one borrower’s file. Only VA determines program requirements, lender requirements vary, and final approval always depends on the lender underwriting your file.