Houston Texas · Member since 2019 · 12 posts · 3 votes
Greetings,
I'm new to real estate and I found my first deal on a duplex in the Houston Texas area. I was going to house hack using a VA loan. I visited the property and made a strong offer. A few days later my realtor called me saying the seller is not accepting VA loan offers.
I wanted to know if any other VA loan buyers have dealt with this? What are some possible reasons sellers stay away from VA loan Buyers? Is there anything a Buyer can do to make the seller more comfortable with accepting a VA loan offer? Any best practices? I look forward to your responses!
The rule of thumb hierarchy of offers is 1. all cash 2. Conventional 20% down loan. 3. Specialty loans like VA, USDA, FHA.
The requirements for loans in the third category, namely inspection criteria, can be more stringent than the other two. This can lead some sellers in some areas, for better or worse, to not accept offers that have those particular financing in hopes of avoiding a situation where the home is tied up for 30-60 days and at the 11th hour the financing falls through. Another option is they know the house won't meet the VA standards.
Right, wrong, or indifferent, that's the way of the world. If I were you, I'd try to offer more earnest money, but that puts you at risk. After that, let them know you like the property and will check back in 60 days. Make another offer around Feb if the property is still on the market.
I have had clients who have used VA loans and have had VA buyers purchase my listings and have never had an issue. Did they accept another offer with more attractive financing terms and contingencies? If so, that actually makes sense but if they aren't considering your offer when they don't have any others just because yours is VA that would be strange.
The only thing I can think of is the seller is jaded by a previous bad experience with a VA buyer and it's impacting their decision making now.
Thanks for your reply. The seller had no other offers and the duplex has been on the market for 190 days. I’m guessing it’s the latter part of your response.
The rule of thumb hierarchy of offers is 1. all cash 2. Conventional 20% down loan. 3. Specialty loans like VA, USDA, FHA.
The requirements for loans in the third category, namely inspection criteria, can be more stringent than the other two. This can lead some sellers in some areas, for better or worse, to not accept offers that have those particular financing in hopes of avoiding a situation where the home is tied up for 30-60 days and at the 11th hour the financing falls through. Another option is they know the house won't meet the VA standards.
Right, wrong, or indifferent, that's the way of the world. If I were you, I'd try to offer more earnest money, but that puts you at risk. After that, let them know you like the property and will check back in 60 days. Make another offer around Feb if the property is still on the market.
@Dwight Porter VA buyers present problems that conventional buyers don't.
The appraisal process is the most stringent of any common loan. It's the same as FHA or USDA, which are very strict ,but VA adds a mandatory wood destroying insect report, which the seller is required to pay for.
In addition, I have personally witnessed appraisers who see it as their role to "fight for the veteran" and by that I mean to hammer the price down for them.
The most recent case was a home that started life as a Campanelli Ranch. These were post WWII cookie cutter ranches built in greater the Boston area. Usually 2-3 beds, 1 bath, built on a slab and about 1300-1500 sq ft. However this one had two ground floor additions plus a 700 sq ft second floor master bedroom suite addition and a 2 car garage and it was now 2,600 sq ft.
I comped it as a contemporary and came up with $380,000. We got it under contract with a VA buyer at $379,000, so I was spot-on with the comps. The appraiser was another story.
He insisted on appraising it as a Campanelli ranch, despite the fact that it was about twice the size of any Campanelli and had a 2nd floor addition - and just for the record, ranches don't have a second floor.
This knucklehead appraised it at $330,000. I appealed by triggering the Tidewater Clause, which gives all parties 72 hours to submit data to support a different appraisal amount. I got him to raise it to $345,000 and my seller and his wife had just found a property they desperately wanted, they took it - and a $34,000 screwing.
In practice, I've never met a seller or agent who wants anything but to get veterans a good deal, but if I had two identical offers and one was VA, I'd educate the seller and let them decide. If it were my own home, I'd ask the vet to use a different loan or choose the other offer if he couldn't.
As an alternative, you might ask about a USDA loan if that town is eligible. That's also $0 down and probably at least a little less problematic than a VA loan.
Not always, but often a veteran is using a 0% down payment to fund the VA loan. This means that if the appraisal comes back lower than anticipated, the buyer doesn't have extra funds to cover this difference and has to simply walk away from the deal.
VA loans require stricter minimum requirements during the safety inspection. This can often lead sellers being forced to complete costly repairs or risk losing the deal.
The VA loan has strict requirements about what fees are able to be paid by the borrower. Some fees such as attorney fees charged by the lender, broker fees, reconsideration appraisal fees, or flood zone determination fees are not able to be paid by the borrower, which means they need to either get waived somehow, or likely charged to the seller.
Due to the extra steps involved in a VA loan, these loans typically take slightly longer to close, (but not by a drastic amount).
@Dwight Porter VA appraisals stay with the property for 6 months.
So, if a property doesn’t appraise for the asking price or close to it that would be a problem for the seller. They also can take longer to close than a conventional loan. Most sellers want quick closes.
Try writing a letter to the seller explaining who you are and why you like the house. Also be very transparent with the process. If you can have your lender send the seller a timeline and what to expect he maybe more prone to accepting your offer. The main thing a seller wants to know is that you’re going to close!
I was selling a house and the buyer was using a VA loan. The inspector found a laundry list of about 20 items that "had to be fixed". One of them was a roof replacement. I said the roof is fine. They countered with it has to have at least x years of life left in it. At any rate, I told the realtor to find another buyer as we weren't going to do all those repairs (many were really piddly little things)
So eventually the list turned into three things. (one of which wasn't the roof), I had the items fixed and closed the sale. If I was selling a property, A VA buyer would be down the list if I had other offers.
@Dwight Porter Just echoing what everyone else says. I'm currently using a VA loan to close on a duplex. I personally believe I'm somewhat lucky. Couple things lined up. First my realtor and mortgage guy, one referred from the other, are amazing. Both have experience dealing with the VA loan process. Second is the sellers agent is new and is being spoon fed and hand held by my realtor. And my realtor put together a profile letter about me to submit. Did your realtor do that?
All of this and I'm in a seriously hot market that some people say is overvalued.
@dwight porter Look at this as a blessing. There is a likelihood that the person had an idea that it would NOT pass a VA Loan Appraisal at the amount they were trying to sell it for so you have probably saved yourself some time. On another note, I would NOT let this disuade you. I am house hacking in a duplex right now that I bought using a VA Loan. Interestingly, when the property was listed it did not mention anything about if they will accept VA or FHA Loans and I had my agent submit the offer anyway, at UNDER the asking price and I got it. Yes there were other offers.
I'm a veteran too and ran into this problem. The issues I discovered by talking to my realtor who was also a veteran is that the VA has stringent rules and codes that can cause delays in closing. (The sellers of the house I bought had to replace a handrail before we could close). Also I've also heard of issues with appraisal prices and market values not lining up. The VA appraisal can apprently be more conservative than market price in some cases.
Lots of good points from all above...In those cases where a seller won't accept VA buyers...This might indicate you want to stay away from a property anyway as a property must pass an Electrical Inspection and a Termite Inspection before a VA Loan can be issued.
Some silly things associated with VA, FHA and the like that are specific to the lender.
These are physical attributes of the property itself commonly not easy or inexpensive to correct. I have heard of one being 75’ rule to do with the well. If this is the case there is nothing at play but the qualification standards of the property itself.
Like most other things the government does to "protect" people, they do more harm then good. There are all sorts of protections built into the VA loan process (around return of EM, inspections, etc) that make it so a buyer -- all else being even a bit equal -- will rather not take a VA buyer.
It sucks. But the same happens with vets using a HUD VASH housing voucher. We used to do what we could to take those units as my wife worked in the VA and I have vets in my family. But the government made the process a giant PITA so we finally quit doing it. If the gov wants to help vet renters, then just pay the damn property owners the way a 'normal' tenant would. If the vet wants the property, that should be what matters. Sadly vets get pushed out to properties that are in bad areas that are harder to rent to 'normies'. Where as if the process was better, they could live anywhere.
@Stacey M. Glad you pointed that out. Appraisal does stick to the property, but only a concern if another VA offer is made after cancelling first VA offer. Doesn't impact follow up offers that are not VA.
Same applies to FHA, as case # is tied to property and not the buyer. Would impact future FHA offers.
To make my VA clients offer stand out, we write aggressive close timelines (14-17 days) and short loan contingency period (10 days).
I have a direct call with the listing agent after offer submitted. Explaining our operations, weekly communications, and speed at which we operate with 100% confidence in always hitting that mark, and they reiterate that to the seller.
Secondly, lender is allowed to cover closing costs that VA doesn't allow buyer to pay, which I also explain to listing agent providing more reassurance for seller, when explained properly.
Last resort is have agent include language in your offer that caps the Max $ dollar amount of repairs you can contractually ask for. Ie. “Cost of repairs paid for by seller not to exceed $2,000”. This would put you in bind, if $5k in repairs needed; however, more reassurance to seller, and now you have the opportunity to be creative (work with lender to get credits to cover the $3k of additional repair costs).
I'm not opposed to the VA loan program, just like I'm not opposed to section 8. I just don't want to personally be involved with it due to additional complexity. Both of my sons are active duty officers (army and USCG) and one has used VA to purchase a home.
@Dwight Porter Guess what???? My appraisal came in low. Like way low. Not that it's way off. So now the seller and I have to negotiate. And they found some small issues with the house. Nothing that cant be fixed. Good luck!
I sold 2 houses to VA buyers. One closed in 30 days, the other was to close in 30 days but closed a week early.
There were no issues along the way, but in both cases the realtors were familiar with VA loan requirements. One specialized in them, and had a loan officer that she worked with often. The houses were prescreened for which loans I would consider based on their condition and these 2 were advertised for VA, along with other loan types because I knew, based on the realtors opinion, that they should pass an inspection. Also in both cases the buyers were already approved for a loan, just needed a house to qualify to they knew that they were within the amount they could finance.
Additionally one of these homes was a mirror image of another house I was selling, and next door. The other house was not VA or FHA loan listed because it had a split in the backyard part of the driveway that would have been expensive to fix and a trip hazard for those loans. They were under contract within 2 days of each other. The VA loan closed in exactly 30 days, the other took nearly 60, with 2 extensions. I got more net from the VA loan. Both sold at the same price. I do not think that the VA loan really had much in extra fees. The other one killed me in title insurance!
I would definitely sell with a VA loan offer as long as the house was pre-screened and so was the buyer.