How difficult is to sell a house without FHA or VA loan?

Question

Hi,

This is my first post here BP and I'm looking to learn more about real estate investing.  I have a townhouse that I'm making an offer to buy and flip, the numbers make sense but what I don't know is that my agent tell me that the community is not FHA or VA approved. With that issue it needs to be a conventional mortgage and I'm okay with that term, but how difficult will be for me to sell the house in the next 3-6 months after repairs.

Thanks for any respond!

Charlie Morales · Answer

@Chris Mason Thanks you for all the tips, very appreciated.

Chris Mason · Answer

Nah, just have her put in the agents only section of the MLS that offers backed by government loan programs will not be considered. Let the buyer's agents and lenders sort it out for you.

If someone tries to be sneaky and waste your time, your agent can easily find out by asking the appraiser if it's a conventional appraisal or FHA/VA. You will also be asked to sign a document that may look different from this, but will have those exact words, if the buyer is using an FHA/VA loan. If you know for a fact that the property can't go FHA/VA, and find out someone is trying to be a unique unicorn and use FHA/VA anyways, cancel the transaction as soon as you find out, so you lose as few days on market as possible.

Charlie Morales · Answer

@Chris Mason Thanks for this info. Completely understandable about the DTI and Credit. So, when I go to sell the SFR I need to ask me realtor to qualify the buyers by credit score so that way I know that I have a higher possibility of a buyer?

Charlie Morales · Answer

@Jaysen Medhurst it's interesting since my realtor tell me that they lower the house price because in the open house most of the customer that go, was looking to finance the house via FHA / VA. About my market is hot right now, I think what is stopping buyers on this townhouse is that was built 1974 one owner :) and don't be remodel inside or outside by the community. The house needs around $15K-20K for updates that includes appliances. In the past years, the market appreciation on houses has been around 8-12% so I know that market is hot plus house is on the entry level homebuyers of 200K & up.

Thank you!

PS. Since I will be buying the house under ARV or Market value I will have some equity right from the begging. What do you think utilize that equity for remodel or buy extra properties.

Chris Mason · Answer

It's not going to make a significant difference. In the single family space, as a lender, the only reasons that typically limit me from flipping an FHA buyer to a Conventional buyer are...

1) DTI. They barely have the income to qualify, so it'll work FHA but not Conv.

2) Credit. They aren't solid on credit, so it'll work for FHA but not Conv.

For you as a seller, both of these translate into a less reliable buyer. For people with solid credit that can easily afford the payments, in the SFR space, FHA rarely makes sense.

Jaysen Medhurst · Answer

@Charlie Morales, shouldn't be too difficult. Most homebuyers don't use FHA / VA. That being said, it would be worth while to check out other sales in the community. Do they stay on market longer than normal? Do the comps come in lower than expected?