If a VA appraisal comes in below the price of your new build, you aren’t stuck. Under the VA option in the TREC Third Party Financing Addendum, you can cancel and get your earnest money back, ask the builder to lower the price to the VA’s value, pay the difference in cash, or ask VA to reconsider the value. The key is to act fast, because the appraisal timeline and your contract deadlines keep running.
Brock Bremmer | U.S. Air Force Reserves Veteran | Real Estate Agent | eXp Realty | San Antonio Metro Area
VA Loan & New Construction Specialist
Also see: VA Loans on New Construction | VA Minimum Property Requirements | VA Loan Guide for San Antonio
How Does a VA Appraisal Work on a New Build?
VA assigns a fee appraiser, and the result is a Notice of Value (NOV) that sets the property’s “reasonable value.” VA’s Lenders Handbook (M26-7, Chapter 10) lets a home still being built be appraised from the plans and specifications or from a matching model home. In that case the value is “subject to completion,” and the appraiser comes back to confirm the home was built to the plans.
Under Chapter 13, an NOV is generally valid for 6 months. If you’re under contract during that time, processing can continue until the deal closes or ends.
The appraiser compares your home to recent sales of similar homes. On a new build, the price may include a lot premium, structural options, and design upgrades. Not every dollar of those upgrades will necessarily show up in the appraised value, and that’s where gaps usually come from.
What Is the VA Tidewater Procedure?
The Tidewater Procedure is a warning before the appraisal is final. Under M26-7, Chapter 10, Topic 8, if the appraiser thinks the value will come in below the sales price, the appraiser must notify the requester (usually your lender) before finishing the report. Everyone then has 2 business days to send more sales data.
For each comparable sale, VA asks for:
- Street address
- Sales price
- Date of sale
- Gross living area
- A copy of the listing, if it was listed
- Anything else that helps the appraiser judge whether it’s a good comparison
VA is clear that this step is only for sharing market data. It’s never an instruction to hit a set value. In practice, your agent and the builder’s sales team can pull recent closed sales of similar plans in the same community or nearby. Those closings often aren’t easy to find in public records.
What Are Your Options If the VA Appraisal Is Low?
The TREC Third Party Financing Addendum (TREC No. 40-11), paragraph 4, gives VA buyers specific protection. You aren’t obligated to complete the purchase or lose your earnest money if the price is more than VA’s reasonable value. The addendum also says the usual 3-day notice rule for property approval doesn’t apply to this paragraph.
Here’s an example. Your contract price is $400,000 and the NOV comes in at $390,000:
| Option | What Happens |
| Builder lowers the price | The addendum allows the seller to reduce the price to the VA value ($390,000), with the down payment and loan adjusted to match. |
| You pay the gap | You can close anyway and pay the $10,000 difference in cash. It must come from a source you disclose to VA, and it can’t be borrowed unless VA approves. |
| Meet in the middle | You and the builder can negotiate a split. Put any amendment in writing. |
| Ask for reconsideration | Request a Reconsideration of Value with better sales data (see below). |
| Cancel | Under paragraph 4, you can end the contract without forfeiting your earnest money. |
If you change the contract after the appraisal, M26-7 says the lender must forward the amendment to the appraiser if it could affect value. Depending on the change, the appraiser may charge an added fee, up to the cost of a new appraisal.
How Do You Request a VA Reconsideration of Value?
After the NOV is issued, M26-7, Chapter 10, Topic 22 lets the veteran ask for a Reconsideration of Value (ROV) in writing through the VA Regional Loan Center, usually through your lender. Market data is encouraged but not required. VA staff review the request within 5 business days. If they order a field review, it’s completed within 20 business days. If VA agrees the value should be higher, it issues an amended NOV.
The best ROV packages use closed sales that are recent, nearby, and similar in size and features. A list of active builder prices is much weaker. Ask your lender how they want it submitted.
Can Builder Incentives Close the Gap?
Sometimes, but there’s a limit. VA lets sellers and builders pay your closing costs, but it caps “seller concessions” at 4% of the home’s reasonable value from the NOV. On a $390,000 NOV, that’s $15,600. Your lender decides which credits count as concessions. A price cut is usually cleaner than a big credit when value is the problem.
If the builder offers a rate buydown instead, see how a 2-1 buydown works with a VA loan.
Does a Builder Contract Have the Same VA Protection?
Not always in the same words. Many builders in San Antonio, New Braunfels, and Boerne use their own purchase agreements instead of TREC forms. Before you sign, look for:
- The VA appraisal clause: What happens if the NOV comes in below the price, and whether your deposit is refundable in that case.
- Deposits: Which deposits, design deposits, and option payments are refundable, and when.
- Price changes: Whether added options or change orders after appraisal raise the price and trigger a new appraisal.
Ask your lender to confirm the builder’s contract works for VA financing. Also read builder lender vs outside lender and watch How to Buy a New Construction Home with a VA Loan in San Antonio.
Frequently Asked Questions: Low VA Appraisals
Do you lose your earnest money if a VA appraisal is low in Texas?
Not under the TREC Third Party Financing Addendum. Paragraph 4 says a VA buyer isn’t required to complete the purchase or forfeit earnest money if the price exceeds VA’s reasonable value. Builder contracts vary, so read the builder’s appraisal clause.
How long does a VA Reconsideration of Value take?
Under VA’s Lenders Handbook, VA staff review an ROV within 5 business days. If a field review is needed, it’s completed within 20 business days, and VA issues an amended NOV if the value increases.
Ready to Buy a New Build With Your VA Loan?
Brock Bremmer with eXp Realty is a U.S. Air Force Reserves veteran who has helped buyers and sellers close 120+ homes across the San Antonio metro. He helps VA buyers compare builders, pull recent sales for appraisals, and review builder contracts in San Antonio, New Braunfels, and Boerne.
- 📞 Call or text: 210-501-5088
- 📧 Email: [email protected]
- 📅 Schedule a free consultation
Also see: How to Use a VA Loan in San Antonio | VA Jumbo Loans | Buying Before Your PCS
Sources: VA Lenders Handbook M26-7, Chapter 10 (Tidewater Procedure, proposed construction, contract amendments, Reconsideration of Value); VA Lenders Handbook M26-7, Chapter 13 (NOV validity); TREC Third Party Financing Addendum, TREC No. 40-11; VA, closing costs and 4% seller concession limit.