Seller only wants Cash or Conventional Lending

11 Replies

Hello! I recently found a good opportunity in Virginia to buy a property and I had been planning on using my VA loan since I'm not in the position to save $100k+ for a down payment. Does anyone have any advice on how to still secure this property? This will be my first investment property so I'm not sure what the best route is. Should I still try offering a VA loan purchase? Secure a hard money loan and then refinance? Is it possible to refinance a different loan into a VA loan? Thanks for any help!

If it is your first property and you are going to live on it, you should be able to use a conventional loan with 5% down and maybe even 3% if your credit is good. It could be the house is not in the best shape and it would not pass the VA loan inspection or FHA inspection as they are more rigorous, seller might want to avoid that situation.

If it is your first purchase, I would not recommend a hard money loan, it will come with points fees and you are still going to need some money to make it work. Also, it can put a lot of stress on you. You could make it work if you think you can buy low enough that you'd have a nice chunk of equity but make sure your comps are solid. 

I bought in Springfield Virginia a year ago and did a renovation in my house.I see you are based here as well. 

Unless I'm missing something the seller probably fell off a wagon. Unless the property won't qualify for loans to begin with what difference does a VA vs Conventional loan have to do with getting paid? Money exchanges hands via title company and each party lives happily ever after.

No offence my guess is the seller is teasing the market, drawing things out, and fishing for higher offers. I experienced the same thing before. 

Thank you Joaquin. I'm speaking to a local lender today to find out what he thinks my best options are. I have always been hesitant to consider hard money until I understand it better so I'll stay away from it for now. Yeah, this property is right by Springfield and out of the few times I've toured it, my agent and I don't see many issues that aren't cosmetic. I'm walking through with my contractor today. So we'll see if he finds reasons that it wouldn't pass the strict guidelines for a VA loan.
Thanks for the reply Jaron. I was going to bring up to my agent that we still offer a certain amount in a VA loan and say that if we can't complete through the VA loan, that we would have to offer less, since there will be many more costs associated with not using the VA loan. 

Have your agent talk to the listing agent. When I see owns/agents put cash/conventional it won't pass VA appraisal or they aren't able to make repairs. By having it listed only cash/conventional, buyers that are investors or have the ability to rehab will buy it. If you do have the ability to rehab the and see if you can lock it up with the VA loan. If you are okay with the rehab that's needed than have your agent convey that to the listing agent so they aren't at ease. Biggest thing is figure out WHY. If it needs something to pass appraisal for a VA loan then it'll take being creative. As someone else mentioned look into 5% down conventional.

Hi @Jordan J. Osborne ,

If the property can pass the VA guidelines and meets the appraised value, I don't see why it wouldn't go for VA. The sellers might just not want to work with VA because of its extensive guidelines and protections for the buyers, but it's not like they can flat out not take VA offers. If you plan to househack then of course, using the VA loan would be the best route in acquiring the property. If not, then going conventional would the best option, though you did say that you didn't have enough for a down payment. Try offering a VA purchase and put terms that entices the seller to go with your offer (shorter escrow day, appraisal gap clause, etc.). If they deny it then have your agent ask them "why" they did. Also to ask your other questions, I wouldn't use a hard money loan to purchase this because you would have to pay points and closing costs, but also there could be a chance when you refinance, you'd have to come out of pocket. Yes you can refinance into a VA loan but you'd have to occupy it for a year after you close. Feel free to reach out if you have any questions.

Originally posted by @Jaron Walling :

Unless I'm missing something the seller probably fell off a wagon. Unless the property won't qualify for loans to begin with what difference does a VA vs Conventional loan have to do with getting paid? Money exchanges hands via title company and each party lives happily ever after.

No offence my guess is the seller is teasing the market, drawing things out, and fishing for higher offers. I experienced the same thing before. 

It is VA appraisal and inspection concerns, combined with the fact that VA buyers may be far less qualified. No down payments and they may have lower credit scores. It just means the loans are higher risk of not closing or delays as repairs are needed. Even if the property is in good condition, that doesn't mean something won't get flagged in inspection. A conventional or cash buyer is overall more stable and will result in less issues getting to closing than VA or FHA. It is a sellers market, so sellers can be picky.

As far as the OP, I would consider a higher deposit with my offer to show the seller I have more skin in the game. They could also write something into the agreement that any costs associated with appraisal inspection repairs would be paid by they buyer. Their real estate agent could explain to the seller that their client is qualified for conventional, but is trying to use beneficial programs available to veterans who served the country. They may still say no. In fact if the listing states no VA, then they really shouldn't accept ANY VA offer.

VA loans can take longer than conventional. Like FHA, VA loans also have requirements that conventional loans don't. It can be an inconvenience to the seller to tie up the property in escrow for 30 days only to have the deal fall through because a handrail wasn't up to the VA's standards.

Anti-veteran discrimination is rampant among Realtors. Any time you read "like FHA loans..." or see "FHA/VA" clumped together like that, it's out of either ignorance, it's a condo that isn't VA-approved, it's out of hating veterans, or because there is an active termite infestation they are proactively trying to hide. VA loans are not FHA loans.

Aside from those issues (hating veterans, ignorance, condo, active infestation), there is zero reason to regard a VA loan as different than conventional. VA loans have the same closing ratio as conventional, FHA loans have a far lower closing ratio. Look it up. If there is to be lumping based on % chance of closing, or closing fast, it should be "conventional/VA," and "FHA/USDA." We can, and do, close VA loans in 21 days or less, all the time.

My most hated comment is that b/c of 0% down, the veteran has no "skin in the game." Maybe that "skin" was attached to a leg that's still in Afghanistan.

Anyways, attach a letter to your offer. House "love letters" are falling out of favor of late due to discrimination allegations(1), in this case the letter is necessary to overcome systemic Realtor discrimination against military veterans (see: Realtor comments in this very thread) attempting to use the military benefits they have earned. Gotta bypass them, get it in the seller's hands, let them decide. Include it with the offer, and by all means send it in the mail too.

(1) The claim goes "If the seller finds out that Mohamed bin Suleman is Muslim from a letter, the seller might discriminate on the basis of religion!" -- oh, because Mohamed bin Suleman was otherwise protected from that discrimination?! And because no one knows that Jesus Martinez is probably Latino, if not for a letter? Like type of financing (VA, etc), names are on purchase contracts. I would actually argue that perhaps Mohamed and Jesus, like military veterans, SHOULD be writing love letters, to humanize themselves (cute baby pics, etc) in the eyes of the seller and overcome those challenges, in both cases.