VA does not address asbestos related issues specifically, however, deteriorating asbestos insulation within the confines of a home may be considered hazardous to one's health. Chapter 12- Minimum Property Requirements VA Pamplet 26-7, Revised states:
12.06 Hazards and Defective Conditions
The property must be free of hazards which may adversely affect the health and safety of the occupants adversely affect the structural soundness of the dwelling and other improvements to the property, or impair the customary use and enjoyment of the property by the occupants.
If an appraiser notices this condition, he/she should make a note on the appraisal report and require an inspection with corrections as needed by a professional in that field with full disclosure to the veteran.