Interesting situation. VA loan with non-refundable earnest money?

3 Replies

I've got an interesting situation, looking for some creative contract terms and/or solutions. I purchased a house at auction. Subsequently I've received an offer from a buyer who wants to buy it as-is. The house is currently not financeable. It needs a little work to pass appraisal and underwriting - furnace repaired/replaced, few pieces of rotten trim, maybe a roof patch, septic pump per county requirements. 

The basics of the offer: VA loan, buyer to do all necessary repairs themselves at no cost to me.

Issues I see and would like to address:

1. Earnest money. I would like to get some form of non-refundable earnest money in case this deal goes sideways. VA amendatory clause makes that difficult. Anyone know a way around that in this situation?

2. Anti-Flipping regs. Normally not an issue but in this case proposed closing date would be less than 90 days and I will be unable to document repairs.

Other pitfalls I'm missing?

We just closed on a house with a VA loan. The VA was quite picky on the condition of properties...this type of financing, on houses that are heavy fixers, won't be approved. For example, a roof must have at least 5 years' worth of life in it. You might consider a joint venture with the buyer. Otherwise you might want the buyer to look into rehab loans, or perhaps create a wraparound for the buyer and keep your financing (cash?) underlying.

This is not the buyer you're looking for.

The house is actually in pretty good condition, dated but functional. The buyer's plan is to go in and fix the items we can identify as needing to be repaired, get the appraisal, and then fix any additional items that get called out. 

I'm not sure what you mean by joint venture? I'm trying to sell them the property. Rehab loan wouldn't make sense for buyer in this scenario. And I'm not interested in financing it - I want my cash out. We talked about quick close with hard money, but buyer doesn't want to eat all those fees - they'd rather put that money towards buying a new furnace. Which makes sense.

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