The VA has a unique set of protocols, known as the Tidewater Initiative, that a VA appraiser must follow when he or she expects the appraised value of a property is going to be lower than its contract price.
This program, often known simply as “Tidewater,” initiated in—you guessed it—the Tidewater area of Virginia (i.e., the Norfolk, Chesapeake, Portsmouth, and Virginia Beach areas). It initially began as a test program in the early 2000s and was expanded to all areas of the country in 2003, as a result of VA Circular 26-03-11. This initiative was subsequently reaffirmed in the issuance of VA Circular 26-17-18 in July 2017.
Tidewater gives the lender (or another party to the transaction) the opportunity to provide relevant data to the appraiser to support the sale price before the appraisal report is submitted to the VA. This initiative has significantly reduced the number of formal Reconsideration of Value (ROV) requests received by the VA.
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How Tidewater works
If it appears to a VA appraiser that the appraised value of a property is going to come in below the pending sales price, the appraiser must contact the designated point of contact (POC) party that is specified in the appraisal order.
The appraiser is not supposed to discuss the contents of the appraisal with the POC at this point, except to explain they are asking for whatever additional information the POC may be able to provide.
Once the appraiser contacts the POC, the POC has two working days to provide additional information to the fee appraiser, in a format similar to the comparable sales grid on the URAR. Verification that the sale actually closed is also required. Pending sales may also be provided, and if such a sale is submitted, the POC must include the complete sales contract with all addendums, as well as a brief narrative describing the similarities/differences between the pending sale and the subject property.
After receiving any additional information, the appraiser must complete the appraisal report indicating that this process was utilized in an addendum clearly labeled “Tidewater.” If the information provided to the appraiser does not result in an increase in value that meets or exceeds the pending sales price, the appraiser must report on:
- Who provided the information
- What information was provided
- Why the information did not change the opinion of value
The appraiser must also comment in the report regarding the amount of time this process added to the overall appraisal delivery timeline.
Tidewater Initiative in real life
At an April 2017 House Committee hearing, Gerald Kifer, who was a Supervisory Appraiser for the Loan Guaranty Service of the VA, testified that the most recent data indicated the Tidewater Initiative was invoked on approximately 24% of all VA appraisals. Mr. Kifer indicated that the Tidewater requirements added approximately two days to the appraisal process in situations in which Tidewater was invoked.
When the appraiser reaches out to the point of contact to invoke Tidewater, the appraiser is not at liberty to discuss the value with the POC; he or she is merely permitted to ask for additional information. In real life, though, the POC knows why the appraiser is calling and typically will ask questions that the appraiser is not permitted to answer, e.g., “How much lower is the value coming in?” The appraiser is advised to politely refuse to answer such questions, citing confidentiality and VA policy.
Sometimes this conversation can be quite uncomfortable, but it is the appraiser’s obligation to make the call and follow the Tidewater procedure.
For helpful examples, illustrations, and in-depth discussion of a wide range of VA appraisal issues, check out our CE course: Appraising for the VA.
Written by Dan Bradley. Daniel A. Bradley, SRA, CDEI is the Director of Online Appraisal Curriculum for McKissock Learning. He has been a practicing real property appraiser since 1987, and has been instructing and authoring appraisal courses since 1992. He is a state certified general appraiser in Pennsylvania and is currently on the FHA appraiser roster. From 2004 to 2013, Dan was a member of the Pennsylvania State Board of Certified Real Estate Appraisers, serving for five years as vice-chairman and three years as chairman. He has also has served as a contracted expert witness appraisal reviewer for the Pennsylvania Department of State.
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