Certificate of Reasonable Value (CRV)

Definition

A Certificate of Reasonable Value (CRV) is an official document issued by the Department of Veterans Affairs (VA), which establishes the maximum loan amount that the VA will guarantee for a particular property based on an approved appraisal. The CRV is integral to the VA mortgage loan process as it ensures that the loan amount does not exceed the appraised value of the property.

Examples

Example One: John, a veteran, was looking to buy a home listed at $250,000. The lender required a CRV from the VA to ensure the home was worth the listing price. The VA conducted an appraisal and issued a CRV certifying the home’s value at $248,000. Consequently, John’s loan amount could not exceed $248,000.
Example Two: Mary, also a veteran, placed a contract on a home for $200,000. The VA issued a CRV valuing the property at $205,000, which was higher than the agreed price. Thus, Mary could obtain a VA loan that covered the $200,000 purchase price.

Frequently Asked Questions

1. How does the VA determine the value on a CRV?

The VA employs a licensed appraiser to assess the property’s market value based on various factors, including location, condition, and comparable sales.

2. Can the amount specified in the CRV be contested?

Yes, if the veteran or lender believes the appraisal is inaccurate, they can request a reconsideration of value by submitting new or additional evidence to the VA.

3. What happens if the CRV is lower than the purchase price?

If the CRV is lower than the purchase price, the buyer can either renegotiate the price with the seller, pay the difference out of pocket, or withdraw from the transaction.

4. Is a CRV required for all VA loans?

Yes, obtaining a CRV is a mandatory part of processing any VA-backed home loan to ensure the loan amount is appropriate for the property’s value.

5. How long is a CRV valid?

A CRV is generally valid for six months for existing homes and up to 12 months for new constructions.

Appraisal: An unbiased professional evaluation of a property’s value.
Mortgage Loan: A loan used to purchase real estate, with the property itself serving as collateral.
VA Loan: A mortgage loan available to veterans, service members, and their families, backed by the Department of Veterans Affairs.
Purchase Agreement: A legal document outlining the terms and conditions of the sale of a property.

Online Resources

References

Suggested Books for Further Studies

“The Book on VA Loans: An Essential Guide to Maximizing Your Home Loan Benefits” by Chris Birk
“VA Loans: VA Mortgage Guide - Understanding the Process” by K. Connors
“Home Buying for Dummies” by Eric Tyson and Ray Brown

Real Estate Basics: Certificate of Reasonable Value (CRV) Quiz

### What entity issues the Certificate of Reasonable Value (CRV)? - [ ] The lender providing the mortgage - [x] The Department of Veterans Affairs - [ ] The local real estate board - [ ] A licensed real estate broker > **Explanation:** The Certificate of Reasonable Value (CRV) is issued by the Department of Veterans Affairs, determining the maximum loan amount they will guarantee based on an appraised value of the property. ### What does the CRV establish for a VA mortgage loan? - [x] The maximum loan principal - [ ] The mortgage interest rate - [ ] The processing fee - [ ] The down payment amount > **Explanation:** The CRV establishes a ceiling on the maximum loan principal that the VA guarantees based on the appraised value of the property. ### Who appraises the property for the issuance of a CRV? - [ ] The seller - [ ] The mortgage lender - [ ] The real estate agent - [x] A licensed appraiser employed by the VA > **Explanation:** For the issuance of a CRV, a licensed appraiser employed by the VA appraises the property's market value. ### What should a buyer do if the CRV is lower than the purchase price of the property? - [ ] Ignore the CRV and finalize the purchase - [ ] Increase the offer to match the CRV - [x] Renegotiate the purchase price or pay the difference out of pocket - [ ] Immediately cancel the contract > **Explanation:** If the CRV is lower than the purchase price, the buyer can renegotiate with the seller, pay the difference, or withdraw from the transaction, but cannot ignore the CRV. ### Can the CRV amount be contested? - [ ] No, the CRV amount is final and cannot be contested - [ ] Yes, but only by the seller - [x] Yes, by submitting additional evidence for a reconsideration of value - [ ] Yes, but it requires legal action > **Explanation:** The CRV amount can be contested by requesting a reconsideration of value, providing additional or new evidence to the VA. ### How long is a CRV valid for existing homes? - [ ] 3 months - [x] 6 months - [ ] 12 months - [ ] 24 months > **Explanation:** A CRV is generally valid for six months for existing homes, allowing sufficient time to complete the VA loan process. ### What protects the buyer in case the CRV does not meet the purchase price? - [ ] The seller’s guarantee - [ ] The lender's agreement - [ ] VA insurance - [x] The appraisal contingency clause > **Explanation:** The appraisal contingency clause protects the buyer if the CRV is lower than the purchase price, allowing them to renegotiate or withdraw from the contract. ### For what type of VA loans is a CRV required? - [ ] Only for newly built properties - [ ] Only for re-financed properties - [x] For all VA-backed home loans - [ ] Only for commercial properties > **Explanation:** A CRV is required for all VA-backed home loans, ensuring the ensured amount does not exceed the appraised value. ### What information does the VA use to issue a CRV? - [ ] Loan amount requested by the buyer - [x] Appraised value from a licensed appraiser - [ ] Buyer’s income level - [ ] Market trends of the past year > **Explanation:** The VA uses the appraised value provided by a licensed appraiser to issue a CRV, ensuring the property’s value supports the loan amount. ### Why is a CRV significant for VA loans? - [ ] It pre-approves the buyer for the loan - [ ] It sets the mortgage interest rate - [x] It limits the VA’s exposure by capping loan amounts - [ ] It determines the property’s rental potential > **Explanation:** A CRV limits the VA's exposure by capping the loan amounts based on the property’s appraised value, effectively protecting against over-lending.

Certificate of Reasonable Value (CRV)