VA Tidewater & Reconsideration of Value for Low VA Appraisals

• A low VA appraisal is frustrating but not final. The VA gives you two built-in ways to challenge it.
• Tidewater lets you submit stronger evidence before the appraisal is locked in; an ROV lets you formally appeal after.
• If neither works, you can renegotiate the price, cover the gap yourself, or walk away with your earnest money intact.

You’ve finally found the perfect home, your offer has been accepted, and you’re looking forward to closing on your new place. But just when you thought things were going well, you find out the VA appraisal came back lower than the agreed-upon purchase price. In the world of VA loans, this is referred to as the lender “invoking Tidewater.” While a low appraisal can be frustrating, the good news is that it’s not always a deal-breaker.

A low VA appraisal can be disappointing if you already negotiated a good purchase price and are preparing to close. But a low appraised value doesn’t mean you should start shopping for another house quite yet. The Department of Veterans Affairs has established processes that allow buyers, sellers, and real estate professionals to provide additional market evidence to potentially support a higher valuation.

As a VA homebuyer, you have two opportunities to challenge a low appraisal. The first is the VA Tidewater Initiative, which takes place before the appraiser finalizes the opinion of value if they believe the property may not support the contract price. The second is a Reconsideration of Value (ROV), which can be requested after the appraisal has been completed if new or overlooked market data may justify a higher value. Understanding how to navigate these two processes can help homebuyers face a low appraisal without assuming the sale is lost.

When the VA issues a loan, the lender caps the loan at the appraised value of the home, not the price you agreed to buy it for. That means that when the VA appraisal comes in below the agreed-upon purchase price, it creates a financing gap. As the buyer, you’re left to figure out how that difference will be addressed before the loan can move forward.

Fortunately, a low appraisal doesn’t always mean you can’t get a VA loan. The VA provides two processes that can help challenge or support a higher valuation:

VA Tidewater Initiative: This option gives buyers and sellers an opportunity to submit additional comparable sales before the appraiser finalizes the value if it appears the home may not support the contract price.

Reconsideration of Value (ROV): If the appraisal has already been completed, this option allows interested parties to request a review based on new or overlooked market evidence.

While there’s no guarantee either process will increase the appraised value, they provide an opportunity to ensure the appraisal reflects the strongest available market data. A low VA appraisal doesn’t necessarily mean the deal is dead, but it does mean there’s more work to do before deciding whether to renegotiate, cover the difference, or move on.

The VA Tidewater Initiative is a built-in safeguard that gives buyers and sellers one last opportunity to support the agreed-upon purchase price before a VA appraisal is finalized. Rather than issuing a low appraisal immediately, the appraiser can briefly pause the appraisal process if they believe the home’s value is likely to come in below the contract price.

When Tidewater is invoked, the appraiser notifies the lender that the value of the property looks like it will come in below the purchase price. The lender then has a short window to provide additional market evidence, such as stronger or more recent comparable sales, that may justify the agreed-upon value. This extra step is unique because it happens before finalizing the appraisal, giving all parties a chance to address valuation concerns early.

It’s important to note that borrowers cannot request or initiate the VA Tidewater loan process themselves. Communication occurs between the VA appraiser and the lender, while the buyer’s real estate agent often works behind the scenes to identify the strongest comparable sales for the lender to submit on your behalf.

1. The appraiser identifies a potential value issue. During the appraisal, the VA appraiser determines that the available market data likely won’t support the home’s contract price.
2. The appraiser invokes the Tidewater Initiative. Before issuing the final appraisal report, the appraiser notifies the lender that they expect the value to come in below the purchase price, triggering the Tidewater appraisal process as outlined in VA Circular 26-17-18.
3. The lender has two business days to respond. During this period, the lender may submit additional comparable sales, market data, or other relevant information to support the contract price.
4. The buyer’s real estate agent helps gather evidence. Although the lender submits the information, it’s usually the buyer’s agent who researches and provides the strongest comparable sales or other market evidence to support the home’s value.
5. The appraiser reviews the additional data. The appraiser considers the new information alongside their original analysis before issuing the final appraisal report. If the additional evidence supports a higher value, the appraisal may be adjusted.
6. If the value remains low, the appraiser must explain why. If the submitted comparable sales don’t support the contract price, the appraiser must issue the final appraisal with a written explanation supporting their final valuation. If the valuation is not adjusted, buyers can consider their next steps, including requesting a Reconsideration of Value (ROV) after closing, renegotiating the purchase price with the seller, or deciding how to cover the difference out of pocket.

If the appraisal has already been completed and the Notice of Value (NOV) below the contract price has been issued, the next option for challenging a low valuation is a VA Reconsideration of Value (ROV). Unlike the Tidewater Initiative, which occurs before the appraisal is finalized, an ROV is the VA’s formal appeal process for reviewing an appraisal after the value has been established.

The buyer requests a Reconsideration of Value, and your loan officer submits it to the appropriate VA Regional Loan Center. The request gives the VA an opportunity to review new market evidence or correct factual errors that may have affected the original appraisal. The VA may agree that the evidence supports a higher value, uphold the original appraisal, or make another adjustment based on its review.

While an ROV can be an effective way to challenge a low appraisal, it’s important to have realistic expectations. There’s no guarantee the appraised value will change, but it’s worth submitting a well-supported request with strong comparable sales and clear documentation to give the VA a compelling reason to take another look.

A successful Reconsideration of Value request needs solid evidence rather than simple disagreement with the appraisal. While your loan officer will submit the package to the VA Regional Loan Center on your behalf, you’ll typically work with your real estate agent and lender to gather the necessary supporting documentation, which can include:

1. New Comparable Sales: Provide up to three comparable sales not included in the original appraisal. The sales must have closed before the appraisal’s effective date and should include MLS printouts, along with a brief explanation of why each comparable better indicates the home’s market value than the comparables used by the appraiser.
2. Evidence of Factual Errors: If the appraisal contains mistakes such as incorrect square footage, overlooked renovations, inaccurate property features, or outdated comparable sales, include a written summary explaining the errors along with supporting documentation, such as floor plans, permits, contractor invoices, or photographs. This is especially important for those using a VA loan for new construction, where appraisals are based on plans and specs that may not always accurately reflect the finished property.
3. A Letter from the Borrower: As the buyer, you should submit a signed letter requesting the Reconsideration of Value. The letter should explain why the appraisal should be reconsidered, include a summary of the supporting evidence, and state the value you believe available market data supports.

Once the package is complete, the loan officer submits it to the appropriate VA Regional Loan Center for review.

The timeline for a VA Reconsideration of Value varies depending on the complexity of the request and the workload at the VA Regional Loan Center. Straightforward cases may be reviewed in just a few business days, while more detailed requests involving extensive documentation or complex market conditions can take several weeks. Although waiting for a decision may delay closing, submitting a thorough, well-organized ROV package can help avoid unnecessary back-and-forth during the review process.

Although both the VA Tidewater Initiative and a Reconsideration of Value (ROV) are designed to combat a low appraisal, they occur at different stages of the appraisal process and serve different purposes. Here’s a quick comparison:

The biggest difference is timing. Tidewater is an opportunity to strengthen the appraisal before the value is finalized, while an ROV is a formal appeal after the appraisal has already been completed. If Tidewater doesn’t result in a higher value, an ROV may still provide another chance to present stronger evidence and request a review.

If the Reconsideration of Value doesn’t result in a more favorable appraisal, you still have a few options. A low VA appraisal doesn’t lock you into a single outcome, but it does inform how you want to move forward based on the gap between the appraised value and the purchase price.

1. Negotiate With the Seller: One of the most common next steps is to use the appraisal as leverage to reopen negotiations. Sellers may agree to reduce the price to match the appraised value or meet somewhere in the middle to keep the deal alive. This isn’t guaranteed, especially in a competitive market, but it never hurts to ask.
2. Pay the Difference Out of Pocket: Buyers can choose to cover the funding gap between the appraised value and the contract price with their own money. By covering the additional costs yourself, you can move forward without a price reduction, but taking on this unplanned expense comes with its own risks and should be weighed carefully against your long-term financial goals.
3. Walk Away From the Deal: If renegotiation or covering the difference doesn’t make sense, the buyer can cancel the contract. In VA transactions, the VA Amendment to Contract provides important protection by allowing the return of earnest money if the home fails to appraise at the contract price, as long as the appropriate appraisal contingency is in place. This makes walking away a much lower-risk option compared to many conventional loans.

Each situation is unique and comes down to various factors, including your budget, confidence in the property’s value, and the seller’s flexibility. A low appraisal can be frustrating, but it doesn’t remove your leverage; it simply changes how you use it.

Having an experienced VA lender and a VA-savvy real estate agent can make both the Tidewater and Reconsideration of Value processes significantly smoother. They know how to quickly identify strong comparable sales, properly document appraisal errors, and move efficiently within the tight timelines of the two-business-day Tidewater window or the more formal ROV submission process.

If you’re navigating a VA purchase and want expert guidance from the start, partner with specialists who understand how to navigate these situations with confidence. Get connected with an experienced VA home loan specialist through AHRN today.