A VA home loan represents a fantastic option for eligible homebuyers. But a VA offer is sometimes frowned upon by a home seller, who may assume that VA financing will slow down the process and involve more red tape than conventional loan offers.
The truth is, VA loan financing can be good for sellers, too, for several reasons. Take the time to learn why and how both sellers and purchasers can benefit from a VA loan.
VA loans are a popular financing option among veteran buyers. They offer service members and veterans the chance to purchase a home with no down payment and flexible credit requirements. However, sellers often have misconceptions about VA loans that lead them to reject offers from VA buyers. As a seller, you want the best outcome when selling your home. Don’t let myths about VA loans cause you to turn down a solid offer. Here are the top 5 problems sellers face with VA loans and how to overcome them.
1. Delays in Closing
One of the biggest concerns sellers have about VA loans is that they’ll take longer to close than conventional mortgages. It’s true that VA loans have a few additional steps that may add a week or two to the closing timeline. However, VA loans can close in 30-45 days on average, which is typical for most types of mortgages.
As a seller you can facilitate a smooth closing process with a VA buyer by
-
Communicating openly with your real estate agent about expected timelines.
-
Being responsive to requests for documents and information from the buyer’s lender.
-
Ensuring the home is ready for the appraisal and inspection when scheduled
-
Confirming any requested repairs are completed promptly.
-
Following up with your agent frequently on the progress towards closing.
As long as you stay organized and flexible, a VA loan closing doesn’t need to drag out longer than other financing options. With good communication, you can keep things moving efficiently.
2. Lower Offers
Another concern about VA loan offers is that they may be lower than bids made with conventional financing. It’s a myth that VA buyers have less money or can only submit below-list price offers. In a competitive market, VA buyers have just as much motivation as other purchasers to offer top dollar on a home.
As the seller, you can maximize a VA buyer’s offer by:
-
Pricing your home correctly from the start based on its condition and comparable sales.
-
Encouraging your agent to actively market the listing to VA buyers.
-
Being open to reasonable negotiations on price and concessions.
-
Considering all offer details – not just loan type – when choosing the winning bid. Cash and rate will not always beat an aggressive VA offer.
-
Countering VA offers instead of instantly rejecting them to allow the buyer a chance to improve on their initial bid.
Don’t assume a VA buyer can’t present the best terms out of hand. Negotiate fairly, and you may be surprised at the offer amount.
3. Limitations on Seller Concessions
Sellers are sometimes concerned about concessions with VA loans. It’s true that VA guidelines limit seller contributions to closing costs to 4% of the sales price. However, concessions are negotiable rather than mandatory. As the seller, you have a few options:
-
Accept the buyer’s initial request for closing cost assistance if it is within VA limits.
-
Make a counteroffer asking the buyer to take on more closing costs.
-
Refuse to cover any closing costs, within your rights as the seller.
-
Compromise by agreeing to a credit that splits closing costs with the buyer.
Work with your agent when negotiating concessions to arrive at an amount you’re comfortable with while still making the sale. Don’t let a reasonable request for closing credits cause you to reject an otherwise appealing VA offer.
4. Appraisal and Inspection Issues
VA loans require a thorough home appraisal and inspection before closing. As a result, some sellers worry VA buyers will demand excessive repairs. However, VA appraisals follow standard property requirements that any buyer would want addressed before purchasing a home.
As the seller, you can avoid major appraisal headaches by:
-
Having your own pre-listing inspection done to identify any defects early.
-
Making minor repairs ahead of putting your home on the market.
-
Thoroughly completing the seller’s disclosure form.
-
Responding promptly to inspection requests and reports.
-
Negotiating repairs reasonably with the buyer based on severity.
-
Understanding your legal rights regarding required fixes.
Stay involved in the inspection process, and don’t panic if minor issues arise. Make rational, cost-effective decisions on repairs, and don’t instantly reject a VA offer due to inspection results.
5. Lack of Knowledge About the VA Loan Process
The last major issue sellers encounter with VA loans is simply lack of understanding about how these mortgages work and their requirements. Learning more about VA loans will help you avoid misjudgments and frustrations when dealing with a VA buyer. Make sure you know:
-
VA loan limits – The maximum loan amount veterans can borrow based on local housing costs.
-
Seller occupancy rules – Veterans can’t obtain a VA-backed loan to purchase a new primary residence from a seller who just bought it unless they previously occupied the home.
-
VA funding fee – The upfront fee veterans pay when taking out a VA loan, which can be financed into the mortgage.
-
VA appraisal differences – VA appraisals help ensure the home is structurally sound and meet safety and security minimums for veterans.
-
Closing cost concessions – VA caps seller contributions to closing costs, but they are always negotiable, not mandatory.
-
VA financing benefits – No down payment required, flexible credit guidelines, and other advantages for veterans.
Learning more about how VA loans work will help you avoid knee-jerk reactions over misperceptions. Get informed so you can make smart, reasoned decisions when addressing the unique aspects of VA financing.
Overcome Your VA Loan Concerns as a Seller
VA mortgages present unique considerations compared to conventional financing offers. But with the right knowledge and approach, you can overcome common seller concerns about VA loans. Avoid rejecting VA buyer offers automatically. Take time to understand the pros and cons, negotiate fairly, and facilitate the loan process properly. The outcome will benefit both you and the buyer in the long run.
With VA loans now making up a significant portion of the mortgage market, you’ll likely encounter VA buyers interested in purchasing your home. Your job as the seller is to keep an open mind, educate yourself, and allow the right VA offer to work for both parties. Leverage the tips above, tap into your real estate agent’s expertise, and give VA buyers an equal opportunity to make their best bid on your property. Take the right approach, and VA financing doesn’t need to be a roadblock to selling your home effectively.
Should sellers accept VA offers FAQs
Some sellers believe an offer with a VA loan wonât close or will take longer to close, will involve a borrower who lacks funds and/or has poor credit, and will result in having to make repairs or lower their price due to strict VA property requirements. But the truth is that VA loans close at rates comparable to other types of financing, including conventional loans, and VA loan borrowers are often preapproved. They also may have more cash on hand to cover appraisal differences and closing costs since they donât have to make a down payment. And the appraisal process isnât unreasonably strict. Itâs designed to ensure that VA borrowers are purchasing safe, livable homes, so as long as the property has been well-maintained and is in good condition, thereâs a strong chance it will be approved.
Contrary to what many believe, a VA loan offer is not bad for sellers. Not having to make a down payment means a VA loan homebuyer may have extra funds to cover closing costs and appraisal differences if the appraisal comes in lower than the sale price. These buyers often come to the table preapproved as well, which means a mortgage lender has already reviewed their finances and determined that they are creditworthy. A preapproved VA borrower may be more likely to close than a conventional borrower who is prequalified or who hasnât yet gone through the preapproval or prequalification process.Â
Sellers pay the real estate agentsâ commissions on VA sales, just as they do with other loan types. The VA borrower may request that the seller pay up to 4% of the loan cost in seller concessions, but the seller is not obligated to cover that amount. They can negotiate with the buyer to find a number that works for both parties. However, the seller must pay a portion of the buyerâs escrow fee, according to REALTOR® Nicole Serviss, and the cost can vary from state to state.
Youâll be helping military borrowers reach a milestone
Financial peace of mind is important to sellers. But for some, so is the opportunity to honor our military members.
âOne of the most rewarding things about accepting an offer with a VA loan is knowing that you are showing a veteran that you appreciate his or her service,â Serviss said. âIt can seem like a small gesture, but it can have a huge impact on that service member or veteran.â
Consider that, as a seller, you can help a vet, active-duty service member, or surviving spouse purchase a home and put down roots.
It might be this personâs first entry into homeownership, enabling them to start a family. They may have recently returned from a deployment and look forward to homeownership as a way to ground themselves and start a new chapter. Whatever is driving them to buy a home, you can honor their military service by considering their VA loan offer.
Why Sellers Should Consider VA OFFERS! | Debunking VA LOAN Misconceptions
FAQ
Why do sellers not like the VA loan?
Are VA loans a hassle for the seller?
What is the seller responsible for on a VA loan?
Is it hard to sell a house to someone with a VA loan?
Can a VA loan help sell a home?
The increased purchasing power allotted to buyers through VA loans can also benefit sellers. For example, a buyer using a conventional loan would need at least a 3% down payment for a $400,000 home, or $12,000. If they wanted to increase their offer to $450,000 to outbid another buyer, they would have to increase their down payment to $13,500.
Are VA loans a good option for sellers?
Seller suspicion can make it harder for veterans using VA loans to get their offers accepted, but sellers need not worry. VA loans offer as many benefits to sellers as they do buyers — like higher closing rates, increased purchasing power, and more lenient underwriting.
Why do sellers not like VA loans?
Many sellers — and their real estate agents — don’t like VA loans because they believe these mortgages make it harder to close or more expensive for the seller. Verify your VA loan eligibility. Start here But those issues are largely myths stemming from the past.
Do sellers have to pay closing costs on a VA loan?
In today’s strong seller’s market, it’s very unlikely a seller would end up paying the buyer’s closing costs. What do sellers have to pay for on a VA loan? Nothing. A few VA loan closing costs cannot be charged to the buyer. But nowadays lenders typically pick up that tab. Do VA appraisers lowball? They certainly shouldn’t.