Why are VA loans rejected by sellers?

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Why are VA loans rejected by sellers?

Freddie Bogard
Member since 2021 · 3 posts · 0 votes

I'm a veteran and I'm trying to use a VA loan to buy a house and every time I find a house in my price range that I like I always get denied and my loan isn't accepted. My question is, what is the issue with VA loans and why does every seller reject VA loans?

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David Pere
Rental Property Investor · Springfield, MO · Member since 2016 · 1k+ posts · 890 votes
5y

@Waylon Zook the loan type should have no bearing on the appraisal result, and VA loans are the only loan with which an appraisal doesn't stick with the property.

@Freddie Bogard It is because the VA loan is misunderstood by real estate agents (and a lot of lenders). That is why you need a real estate agent who understands the VA loan, and a lender who can go to bat for you, in order to help you take full advantage of this loan.

What market are you looking to buy in? 

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  • Waylon Zook
    Etna Green, IN · Member since 2015 · 207 posts · 157 votes
    5y

    @Freddie Bogard

    Va loans have a tendacy to come in low on appraisal and some sellers are reluctant to deal with the extra inspections from the VA appraiser.

    2Reply
  • Daniel Lehman
    Lender · Carlsbad, CA · Member since 2016 · 90 posts · 56 votes
    5y

    @Freddie Bogard because sellers and their agents don’t understand them. Your lender needs to call the seller each time you make an offer and dispel their misconceptions. Appraisals are the same as conventional now (for the most part). Non-allowables at not an issue. They are not more complicated. Dispel the misconceptions and you’ll get your offer accepted. Sellers want to sell to veterans.

    1Reply
  • Daniel Lehman
    Lender · Carlsbad, CA · Member since 2016 · 90 posts · 56 votes
    5y

    When I said seller I meant sellers agent.

    1Reply
  • Freddie Bogard
    OP
    Member since 2021 · 3 posts · 0 votes
    5y

    @Daniel Lehman, thank you for the information you've given me. It is really helpful and I plan on having my lender reach out to the seller agent to try to get this house. Thank you again.

    0Reply
  • David Pere
    Rental Property Investor · Springfield, MO · Member since 2016 · 1k+ posts · 890 votes
    5y

    @Waylon Zook the loan type should have no bearing on the appraisal result, and VA loans are the only loan with which an appraisal doesn't stick with the property.

    @Freddie Bogard It is because the VA loan is misunderstood by real estate agents (and a lot of lenders). That is why you need a real estate agent who understands the VA loan, and a lender who can go to bat for you, in order to help you take full advantage of this loan.

    What market are you looking to buy in? 

    3Reply
  • Waylon Zook
    Etna Green, IN · Member since 2015 · 207 posts · 157 votes
    5y

    @David Pere even if the loan doesnt stick with the property it still screws up that deal ?

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  • David Pere
    Rental Property Investor · Springfield, MO · Member since 2016 · 1k+ posts · 890 votes
    5y

    @Waylon Zook An appraisal is an appraisal. Houses don't just appraise for less because of the VA loan. Financing type holds no bearing on appraised value, this is a myth.

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  • Waylon Zook
    Etna Green, IN · Member since 2015 · 207 posts · 157 votes
    5y

    @David Pere in our area they need to be va approved appraisers and they typically have more stringent guidelines. Sellers are more likely to accept conventional over va due to bad expériences with them.

    As with anything the lender can make a difference with the experiance. That being said if the offers were the same otherwise I would accept a conventional over va.

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  • Aaliyah Walton
    Member since 2020 · 5 posts · 5 votes
    5y

    @Freddie Bogard I am literally having the same problem. I once asked my realtor when she would be available to show me a house and she messaged me back and told me that the seller had two conventional loan offers and I would not be able to beat them since I was going to use a VA loan to finance the home.

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  • David Pere
    Rental Property Investor · Springfield, MO · Member since 2016 · 1k+ posts · 890 votes
    5y

    @Aaliyah Walton What market is this? 

    You NEED a new agent. They sound like garbage. 

    I have friends in San Diego county beating out offers with the VA loan in one of the most competitive markets in the nation. It is absolutely possible, if your agent knows what they're doing.

    2Reply
  • Maxwell Ventura
    Real Estate Agent · San Diego, CA · Member since 2016 · 308 posts · 173 votes
    5y

    @Aaliyah Walton

    Using the VA loan doesn't have to hurt the strength of your offer. VA's get accepted over conventional all the time, even in this tough SD market. It's not just the price and type of loan, but the terms also play a big role.

    We don't bash other agents but that was a ridiculous statement to say a VA loan has no chance against 2 other conventional products.

    0Reply
  • Aaliyah Walton
    Member since 2020 · 5 posts · 5 votes
    5y

    @David Pere <30 minutes of Huntsville, AL. 

    @David Pere @Maxwell Ventura Thank you for the advice! She has been in the game for a while and the market is hot so while I thought her statement sounded a little weird, I believed her. 

    1Reply
  • Simone G.
    Flipper/Rehabber · San Diego, CA · Member since 2016 · 26 posts · 86 votes
    5y

    @Aaliyah Walton, your realtor sounds like an absolute strike, sorry, but @David Pere is absolutely correct; hire someone else. Pretty sure California would consider her bad advice discriminatory, unsure about Alabama.

    3Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    5y

    Offer a $5k or $10k earnest deposit with a 3-5 day inspection as your only contingency if you’re sure you’re approved. That way the seller knows they’ll be up $5k or $10k if you don’t back out within 3-5 days. A short enough time for them to get it back on the market. 

    In this seller’s market there are still people who will take less money to be confident the deal is done. Especially if they need the money for the purchase of their next house. I’ve made plenty of offers with zero contingencies because I know In my market the houses I target just don’t have huge problems. So if My lender says I’m approved I have zero problem offer a $10k or $20k non-refundable earnest deposit. It doesn’t cost me anything it just goes towards the purchase and often gets me a deal even if someone else offers $5k or $10k more.  

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  • Twana RasoulBusiness Member
    Real Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
    5y

    @Freddie Bogard VA loan is an amazing loan product and extremely misunderstood by agents who in turn unintentionally mislead their sellers on not take it because buyer doesn't have any money in the deal "no skin in the game". Pretty much every time I've gotten a VA loan accepted, especially in multiple offer situations, I've had to give a nice and long lesson to listing agent and at times get in a conference call with the lender as well to help educate and reassure them. That said, we have been able to beat out any other loan types with VA loan, even on multifamily. I've got a multi unit in contract now with VA buyer and we beat out multiple cash offers :)

    I will say one thing though there is an additional requirement with VA loans that makes it a little tougher on some multi family deals. You have to get termite clearance for a VA loan during escrow and some sellers don't like having to find accommodations for their tenants while the property is being tented/fumigated. It is a hassle for them where as with a conventional buyer they can just give a credit for termite and not have to actually get a clearance.

    That said, VA loan is the absolute best loan product, especially when starting out in a market like San Diego and buying multifamily.

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    3Reply
  • Freddie Bogard
    OP
    Member since 2021 · 3 posts · 0 votes
    5y

    I would like to thank everyone who offered their input, it was very helpful. I ended up switching agents and I kind of felt bad because my first agent is a high school friend but in the end I gotta fo what's best for me and now I might possibly have a house. Thank you everyone. 

    0Reply
  • Kenneth Donaghy
    Real Estate Broker · San Diego, CA · Member since 2016 · 355 posts · 195 votes
    5y

    Everyone's input is valid. Not all situations are equal. There are always different variables to consider. It's hard to know the details with small forum post. 

    For example, this week I got two VA offers accepted to sellers not accepting VA loans in the hot market of San Diego, and just got word one wasn't accepted.

    One offer, a 3 unit, I had to teach the seller and the seller's agent how the loan works, and how we can work together on the appraisal, and termite. 

    The second offer, I offered to make the complex VA approved during Escrow.

    The third, wasn't accepted because there were two other offers with huge downpayments, no contingencies, buyers offering sellers unlimited rent-back. My client couldn't offer that, I told the listing agent, the Sellers made a great decision. Thank you for the information, I will take this back to my client to help set the expectations moving forward. 

    All three situations the Sellers made the best decision, and everyone got to learn something. 

    1Reply
  • Lynnette E.
    Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
    5y

    I had two houses side by side, mirror images. I listed one and specifically said FHA/VA loans are ok. For the other one I said I would not accept either.

    Why?

    Condition.  I knew that the one house had a long driveway with a crack in it that was more than an inch wide.  The one side of the crack in the blacktop was lifted up about another inch by the obvious tree root.  This was a 'trip hazard".  On inspection that house would not be approved for the loan without a remedy.  I did not want to fix it.  The only fix that would hold required removing a 60 year old huge tree and its main roots before fixing the driveway.  It was a hot market.  Spending that money would get me nothing.

    One house sold with a VA loan, no problems. The other was a different loan. And no problem.

    So, you can have the agent ask why it was not accepted.  It may be that the seller knows that the house will not pass the inspection and does not want to fix that item.  Or you may need to educate the realtor.  Some thing the loans are slow to close, and they are not anymore.

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  • Sandra HabigerPro Member
    Accountant · Tacoma, WA · Member since 2019 · 50 posts · 9 votes
    5y

    @Freddie Bogard

    I'm in the process of selling my house and I can tell you why I didn't accept any of the offers with an VA loan:

    All offers (including the VAs) were $20-30k above asking price

    On the VA loans:

    There was no down payment

    The earnest money was $2-3k

    And the people only had $2,000 on their 22AD form or no 22 AD at all.

    (From what i understand, the 22AD form states the amount that the buyer will be able to pay in addition of the appraisal comes in low).

    Now let’s say that my house didn’t appraise at the amount of the bid. Due to the low or non existent 22AD form, I didn’t want to risk for the deal to fall through and having to start from the beginning.

    1Reply
  • Joshua McMillion
    Rental Property Investor · Madison, AL · Member since 2019 · 487 posts · 658 votes
    5y

    @Aaliyah Walton

    I just purchased my second home in Madison, AL, with a VA Loan. Everyone here, especially David Pere, is stating the truth. If your agent is telling you that your loan is beating out, be conventional loans find a new agent. I would be more than happy to share my agent if you would like? 

    As for the market, Huntsville, AL, is very hot. I recommend making the deal personal. I write a letter to the seller each time I placed an offer on a property. My last offer was accepted because the seller wanted to sell to me and not the other, higher offers. Just because other people are willing to overpay for properties does not mean you are cut off from the market. Often homes being sold in this area do not allow for inspection, which is crazy to me. My gut tells me if a seller does not want to use a VA loan, then there is something wrong with the property. 

    I hope this helps!

    Sincerely 

    Josh 

    2Reply
  • Patrick Britton
    Ann Arbor, MI · Member since 2014 · 1k+ posts · 997 votes
    5y

    VA funded purchases require a VA appraisal, which can often be stricter (in terms of condition requirements) than other loan types. As well, getting a VA approved appraiser takes longer because frankly, there are fewer of them. The closing timeline is also longer.

    In short, VA funded purchases require more time under contract and a near-perfect condition of the house. Compare this versus a conventional loan, which can very easily close within 30 days. most VA loans close in 45 to 60 days minimum.

    Considering how insane the market is, sellers are better off waiting for a non-VA borrower who has a higher probability of closing on time and with fewer extra requirements placed on the seller's house.

    0Reply
  • Joshua McMillion
    Rental Property Investor · Madison, AL · Member since 2019 · 487 posts · 658 votes
    5y

    @Patrick Britton


    Agree with everything expect closing with a VA loan. I just closed on a VA loan in 30 days. It comes back to finding the right team (agent/home inspector/lender) with the right education and tools.

    1Reply
  • Patrick Britton
    Ann Arbor, MI · Member since 2014 · 1k+ posts · 997 votes
    5y

    @Joshua McMillion you must have been very lucky. The vast majority of VA loans require at least 45 days. i've worked with lenders who average about 45 to 50 days to close (sample size +300). it often has nothing to do with the lender, but rather how soon the appraisal is ordered, how close to perfection the condition of the property is, how quickly the appraiser can get to the property, how many assignments the appraiser is burdened with, and to a lesser degree is the complexity of the property, borrower and if your area is more prone to pests, insects, etc.

    Lastly, (and this is only based on personal experience working with about a dozen VA borrowers in WA state) houses near military bases tend to get approved quicker than houses far removed from bases. I don't like speculating, but presumably there are more VA approved appraisers in areas where VA loans are in higher demand.

    1Reply
  • Aaliyah Walton
    Member since 2020 · 5 posts · 5 votes
    5y

    @Joshua McMillion Thanks, for the tip and yes please send me your agents info.

    0Reply
  • Joshua McMillion
    Rental Property Investor · Madison, AL · Member since 2019 · 487 posts · 658 votes
    5y

    @Aaliyah Walton

    No worries, glad I could help. I sent you a DM with his contact information. 

    Sincerely, 

    Josh

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