Selling home to VA buyer

[moneymaven]

I also posted this in the home thread in Smart Spending...

Last night, we received word from our agent that we received a full price offer. Everything in the offer is reasonable and customary. The buyer appears to be a single parent and buying with a VA loan. It also sounds like he was set to close on another property that appraised significantly lower than purchase price and he was financing 100% of the purchase price. Seller wouldn't come down (variance on price and appraisal was significant - like 45K) and he could only bring $15,000 cash to the table, which still wasn't enough. I am only hesitant because I've heard selling to a VA buyer can be very difficult in terms of satisfying inspection and appraisal items. Our home is in great condition, to our knowledge, but this is causing me some pause. Also, closing is nearly 45 days from now due to the new TRID rules.

Positives are that we know financially that he is in good shape since he was very close to closing on the last property and he has some cash to bring to the table in case there is an appraisal issue. His lender sent us a prequalification letter and has offered to speak with us on any concerns we may have about his status.

Negatives that I've come up with include that with VA, there is no negotiating on price due to inspection items. They want them fixed, so the home is in good working order for the vet. This particularly stinks due to the holidays coming soon and the timeline on the deal.

Otherwise, I love the idea of selling to a veteran. Anyone with experience selling or buying with a VA loan?

[The Captain]

The first home DH and I purchased together we sold to a vet.  The inspection was brutal.  Absolutely nothing was missed and DH and I took very good care of that house (new roof with re-deck, tore up driveway to put in code clean out pipe, all new mechanicals etc.  We though the asbestos was going to be an issue, but it wasn't (it was properly contained). 

We had to fix one window with a small crack and re-paint the garage (some paint was peeling in the back and of course it had to have lead).  The appraised came in at full list so we didn't have a problem with this.  This was , GAWD, over 17 years ago though so take what I say with a grain of salt.

[CCL]

If your house is in great condition, then why would you not sell it to him?

I don't understand why there is such hesitation to sell to VA buyers (not you in particular, just in general). I have had Realtors who refuse to sell to VA buyers and I think it's ridiculous. If the houses were worth so much more than the veterans were offering, they would have been snapped up previously.

[souldoubt]

I think the concern is what may come up during an inspection that the VA lender will require to be fixed or replaced before approving the loan.  I don't have experience with a VA buyer but I have a few friends who purchased with an FHA loan which I've heard is pretty similar.  One of them was trying to buy a place that didn't have an oven which he didn't think twice about because he would buy his own.  The lender didn't like the fact that it didn't have an oven and initially wouldn't approve the loan after the inspection.  He finally got passed that and a few other nit picky things they found which aren't things you would experience with a non-FHA/VA loan.  

Unless you've got any other offers I don't think it's too much of a burden to accept and get the inspection set up.  If it comes back with things you don't want to fix or replace because of the time and/or money involved or if the appraisal is too low you can always decline to make any changes or drop the price and that's that.  

[The Captain]

Oct 20, 2015 13:57:22 GMT -5 CCL said:

If your house is in great condition, then why would you not sell it to him?

I don't understand why there is such hesitation to sell to VA buyers (not you in particular, just in general). I have had Realtors who refuse to sell to VA buyers and I think it's ridiculous. If the houses were worth so much more than the veterans were offering, they would have been snapped up previously.

The timing and the delays could be an issue for some people.  DH and I have always had it so we moved into the new house before the old one was sold or moved into.  Less stress that way. 

Nitpicky repairs are a pain in the ass.  The window repair was like $50 for a corner crack that was less than 2 inches long.  It was several hundred to get the whole garage painted for some peeling paint in an area no one would ever see. 

DH and I had the money for the nitpicky repairs.  Not everyone does, especially when they're moving or buying a home themselves.  Also, ALL repairs have to be done and paid for by the seller before the funds to purchase will be disbursed.  Most conventional homes just negotiate purchase price on repairs needed if they're extensive, or pass if they are minor.

[Deleted]

We sold to VA buyers last year.  They are common in our area so most realtors are familiar with the process.  Our agent said the two things they are usually sticklers about are railings and peeling paint.   Also the VA appraisal was the last thing done, so we were concerned about it all falling apart until  the appraisal came in, which was 2 weeks before closing. 

I would rather sell to a conventional buyer than VA or FHA.  The buyer has more discretion in the fixes that need to be done.

[HoneyBBQ]

I've bought with a VA loan and it was NBD. *shrug*

[imanangel]

Oct 20, 2015 15:27:45 GMT -5 HoneyBBQ said:

I've bought with a VA loan and it was NBD. *shrug*

^^That. We purchased 2 homes so far with VA loans and there weren't any problems at all. Both times it was a really quick process. 

I have never lived in a tight housing area, but I honestly don't understand why anyone would pay more than what a house was appraised at.  Is it normal for people to bring money to the table to pay the difference between the appraisal and what the seller wants? Nope, can't see myself ever doing that. *We are starting to look at houses here, so "knock on wood" that I don't have to eat my words!*

[Anne_in_VA]

I've bought two houses with VA loans and both times it was NBD.  I will say that the last purchase (about 2yr ago), had to have a couple of fixes done after the inspection.  One was some wood rot in a doe bottom plate and I can't remember what the other was.  The inspector found a few nit-picky items, but the VA didn't make the seller fix those.  

I don't think we had a very good inspector although he came highly recommended, because he missed where the roof had underlay that was rotted out.  When DH got up on the roof to clean some gutters, he almost fell through and he said it was pretty obvious when he got up there that it was bad.

[bean29]

Oct 20, 2015 16:28:37 GMT -5 imanangel said:

Oct 20, 2015 15:27:45 GMT -5 HoneyBBQ said:

I've bought with a VA loan and it was NBD. *shrug*

^^That. We purchased 2 homes so far with VA loans and there weren't any problems at all. Both times it was a really quick process. 

I have never lived in a tight housing area, but I honestly don't understand why anyone would pay more than what a house was appraised at.  Is it normal for people to bring money to the table to pay the difference between the appraisal and what the seller wants? Nope, can't see myself ever doing that. *We are starting to look at houses here, so "knock on wood" that I don't have to eat my words!*

imanangel:  My DN and his wife did this past summer.  They had offered on several houses and lost out to higher bidders every time.  They offered more than asking, but when the appraisal came back, it was quite a bit less than the accepted offer.  I want to say it appraised at about $140,000 and they ultimately agreed to pay $150,000 but their original accepted offer was around $160,000.  They felt they were in a rising market and if they walked away and started a new deal...the upward price momentum would put them at the same point.  I think they were spot on in their assessment, but it does not always work out that way.

The house they bought had been all fixed up, new doors, new flooring, new counter tops etc.  If they had bought a fixer upper it probably would have cost them just as much if not more to get the house to the same condition.

[zibazinski]

I won't sell to VA or FHA. Too much hassle and I don't need it. 

[kccini9]

My husband is a vet. We've bought 2x using his VA loan and sold twice to VA buyers. One inspection when we were buying was a joke. The inspector barely looked at anything and missed lots of stuff. I don't remember much on selling the first house, but I don't recall it being that difficult. The second house, we had to make 1 repair (that I can't remember) to the tune of like $500. I want to say it had something to do with adding stairs onto the deck, but I could be totally wrong on that. In every instance of selling and buying, we closed within 30-45 days. There was nothing ridiculous about it. When we go to buy our next house, we will most likely use his VA loan again, as I doubt we'll have 20% saved up by then.

[CCL]

Oct 20, 2015 15:27:45 GMT -5 HoneyBBQ said:

I've bought with a VA loan and it was NBD. *shrug*

What is NBD?

[CCL]

Oct 20, 2015 14:29:00 GMT -5 pooks said:

We sold to VA buyers last year.  They are common in our area so most realtors are familiar with the process.  Our agent said the two things they are usually sticklers about are railings and peeling paint.   Also the VA appraisal was the last thing done, so we were concerned about it all falling apart until  the appraisal came in, which was 2 weeks before closing. 

I would rather sell to a conventional buyer than VA or FHA.  The buyer has more discretion in the fixes that need to be done.

Hmmm...I just bought another house and it was 2 wks from the day we made the offer to the day we closed. It sounds like maybe they are quite a bit slower?

[TheOtherMe]

The house I know live in was purchased using a rural development loan with 100% financing.  The inspection was a joke.  Only showed things like redo the paint here, etc.  It was a new house so there should not have been any major issues but you never know.

Only problem was I had to purchase a warranty, but seller agreed to split the cost with me.  He did not have to do that.

[The Walk of the Penguin Mich]

Oct 20, 2015 20:55:17 GMT -5 CCL said:

Oct 20, 2015 15:27:45 GMT -5 HoneyBBQ said:

I've bought with a VA loan and it was NBD. *shrug*

What is NBD?

No big deal

[sesfw]

I think the biggest thing about selling VA, FHA, or any other gov't funding is the points at closing. If I'm remembering correctly the vet (buyer) isn't allowed to pay any closing costs so all charges are on the seller.

Last time I sold a home (2001) I told the realtor I would not pay points, so the offer came in high enough to cover the closing costs.

Talk to your realtor about the closing points and how much money in hand you will receive with this deal.  Then decide if it's something you can accept.

[Mardi Gras Audrey]

I have bought 2 homes (and DH bought 2 homes) with a VA loan and I have sold 2 homes to FHA buyers.  All of the transactions went smoothly.  We were told the VA inspection would take longer but it didn't (This was this past Feb).  In our area, the VA inspector came quickly and had no issues.  The FHA inspector (we were the sellers) was supposed to take a little longer but it didn't (he ended up being in our city and having some free time so he stopped in 1 week early to get it done).

The FHA and VA loans did take longer than 30 days to close but that wasn't an issue with either agency or inspection, it was an issue with the lenders (For the FHA one, the lender was backed up and couldn't get the closing done in time... with our VA purchase, our lender dragged their feet and wasn't on top of it so it closed in like 45 days   .

[bobosensei]

Oct 20, 2015 22:15:55 GMT -5 sesfw said:

I think the biggest thing about selling VA, FHA, or any other gov't funding is the points at closing. If I'm remembering correctly the vet (buyer) isn't allowed to pay any closing costs so all charges are on the seller.

Last time I sold a home (2001) I told the realtor I would not pay points, so the offer came in high enough to cover the closing costs.

Talk to your realtor about the closing points and how much money in hand you will receive with this deal.  Then decide if it's something you can accept.

A VA buyer can choose to pay the closing costs.  If they want it rolled into the loan though it is something odd, like they have to get the seller to agree to raise the purchase price the amount of the closing costs and then have the seller bring the money to the table.  So the seller is not out all of the closing costs.  But I guess it also depends on if there is enough wiggle room between the purchase price and appraisal so that the VA allows the loan to be increased.

[HoneyBBQ]

I paid my own closing costs for my VA loan. 

[raeoflyte]

Maven--you've probably already made your decision, but fwiw I would do it.  VA appraisals are taking 2-4 weeks in our area right now, but since you're already familiar with the TRID time frames, I wouldn't let the appraisal stop you.  I don't see that many conditions on VA appraisals for repairs either unless the house really needs it.  

[moneymaven]

Oct 21, 2015 23:38:11 GMT -5 raeoflyte said:

Maven--you've probably already made your decision, but fwiw I would do it.  VA appraisals are taking 2-4 weeks in our area right now, but since you're already familiar with the TRID time frames, I wouldn't let the appraisal stop you.  I don't see that many conditions on VA appraisals for repairs either unless the house really needs it.  

I'm really glad you chimed in, Rae! I was going to message you soon.

We accepted the offer and will let this play out. We will still allow showings of the property despite being under contract and may accept backup offers in the event something falls through. We are hopeful to sell to this VA buyer and his family!

[raeoflyte]

Very good!  It's probably a good idea to have your agent pester their agent and see if they are holding up on ordering an appraisal until after their own inspection and if so, they need to do that inspection asap.  We recommend that people order the appraisal at the same time as the inspection to save on time frames.  Their lender could end up eating the cost of the appraisal, but that doesn't happen to us that often.  

[TheOtherMe]

With my rural development loan, I rolled closing costs in to the loan.  I do have equity now and would walk away with a check if I sold the house today.

[moneymaven]

Oct 22, 2015 9:52:43 GMT -5 raeoflyte said:

Very good!  It's probably a good idea to have your agent pester their agent and see if they are holding up on ordering an appraisal until after their own inspection and if so, they need to do that inspection asap.  We recommend that people order the appraisal at the same time as the inspection to save on time frames.  Their lender could end up eating the cost of the appraisal, but that doesn't happen to us that often.  

Thank you, Rae! Radon equipment came yesterday and inspection is on Monday. The buyer and his lender are working to make this happen quickly. I'm told the appraisal has been ordered, as well.

[motherto2]

My daughter just bought her first home in June with a VA loan. We didn't have any issues with the appraisal, other than the fact that the detached garage had termite damage and he wanted the termite inspection to verify that they had checked out the garage and it was not active. Her little house was built in 1935, so there were probably a lot of things the appraiser could have brought up.  The problem she ran into had to do with the lender. The guy that was working her loan was clueless. They gave her a  preapproval letter, then actually increased it another $1K a few weeks later, and then by the grace of God, he was on vacation and his supervisor had to get involved. My daughter was away doing military stuff, so I had power of attorney. Come to find out, he had overqualified her by almost $1oo/mo which is significant. Long story short, the VA process wasn't the issue at all. It was the lender. But I think if we had used this lender for a conventional loan, we would have ended up with the same problems. I sold my last home 15 years ago to a military couple. We closed in 30 days. Talk about a whirlwind! I actually needed more time to get things packed and moved (long story) but there were no issues with that one at all. We didn't use any realtors.

I say go for it.

[moneymaven]

Radon testing and inspection are complete. We should have their inspection list this week. They've got the appraisal tentatively scheduled this Thursday. The lender has been very helpful and communicative thus far so we hope to expedite closing.

[moneymaven]

Well, we got the inspection repair items and buyer shared full copy of the inspection report. Requests are reasonable. Fix the very slight leak on water main, add pressure relief valve, repair some window glazing, secure down siding board that has pulled away slightly, and level the AC. They did specifically request licensed plumber, licensed HVAC contractor and glass professional do all the repairs and that we submit receipts as proof. DH is handy and could probably do all of it, but since that's not the request, we have to decide how to proceed. After seeing the inspection report, buyer could have asked for a lot more but was reasonable
and has asked for some of the larger items.

[moneymaven]

Inspection resolution has been agreed to by both us and buyer. House was appraised yesterday, so upon receipt of the appraisal information, we can get this show on the road!

[Wisconsin Beth]

Good luck!