Recently there was a situation where a buyer was making an offer on a property using VA financing. During negotiations it was made clear that the price the seller would accept would take into account the fact that VA and FHA loans frequently hold properties to higher standards and there would very likely need to be some painting and potential other repairs as well (Its an older home). Communications were pretty clear that meant bringing it to the point where it would pass the VA appraisal process and that this did not mean painting the whole house.
The appraisal process actually went very smoothly and no painting was required at all though the seller had already had some of the work done. The property also appraised for the purchase amount.
The buyer wanted $5000 refunded as he says the house had not been completely painted and threatened not to close.
Here are the pertinent things to remember I think.
1) It was pretty clear that the amount was to cover an eventuality
2) The property appraised at the purchase price or above in its present condition
3) There was nothing in the P&S making the sale contingent on the house being painted.
Note: I originally wrote this post before closing and asked people to give their opinion on whether they felt buyer was due $5000. The property has closed so I have rewritten this to be an event in the past. The buyer did not pursue the $5000 in the end and all parties are happy with the way things turned out.
VA (and FHA) loan appraisers will often require repairs to a home and they are usually along the lines of health, safety, livability. This article is a very helpful resource if you are relying on a VA or FHA loan and want to know if the property you have chosen will require them.