Are you a veteran or service member who used a VA loan to purchase your home? If so, you may be curious about how the VA mortgage will affect your home-selling process. Don’t worry, as it is not that much different from any other type of real estate transaction.
To help answer all your questions and provide some insight into what to expect when selling with VA loans, we will go through some of the most important points you need to keep in mind below.
Getting your home ready for selling can be stressful enough without having to worry about specific requirements for VA loan buyers. As a seller, you want the smoothest sale process and the greatest pool of qualified buyers, so it’s important to understand what selling to a VA buyer entails. I’ll explain everything sellers need to know when considering VA buyers for their property sale.
What Are VA Loans?
First, let’s start with what VA loans are. VA loans are mortgages backed by the Department of Veterans Affairs that help eligible military members, veterans, and surviving spouses finance home purchases with little or no down payment.
Instead of requiring a down payment, the VA guarantees these loans, protecting the lender from loss if the borrower defaults. Thanks to this VA backing, veterans and service members can more easily qualify for financing to buy a home.
Pros for Sellers With VA Buyers
Sellers are often wary of potential hurdles and delays with VA loans. However, selling to a buyer using a VA loan has several advantages:
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Higher likelihood of closing: VA borrowers are less likely to have financing issues and more likely to close than conventional buyers. According to Ellie Mae data, 70% of VA loans make it to closing vs. just 51% of conventional loans.
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Better buying power The no down payment feature gives VA buyers increased purchasing ability, Your buyer pool expands when you include prospective VA loan borrowers,
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Less stringent credit requirements: VA underwriting guidelines are more relaxed than conventional loans, meaning borrowers can qualify with lower credit scores. More buyers may meet eligibility requirements with a VA loan than a conventional loan.
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Faster closing timelines: Contrary to popular belief, VA loans can close just as quickly as conventional loans. The average VA loan closes in 45 days, only about 3 days longer than the average conventional loan.
VA Appraisal and Repairs
One key difference in selling to a VA buyer is the home must pass the VA appraisal, including meeting VA minimum property requirements (MPRs). MPRs establish minimum standards for safety, security, and livability.
As a seller, you aren’t responsible for making repairs if your home doesn’t initially satisfy MPRs. The buyer can negotiate repairs or apply for a waiver. Negotiating repairs benefits you since MPR repairs can only be minor.
Seller Concessions
The VA allows sellers to pay reasonable closing costs on the buyer’s behalf through seller concessions. You can offer a VA buyer up to 4% of the purchase price in concessions if you choose to help with closing costs.
VA Funding Fee
All VA loans require the funding fee, typically ranging from 1.4% to 3.6% of the loan amount. The fee goes to the VA to offset program costs.
The buyer usually pays this fee, but as the seller, you can negotiate to cover all or part of it through closing cost concessions if you want to make your property more enticing to VA buyers.
Tips for Marketing Your Home to VA Buyers
If you understand the realities of VA loans from a seller’s perspective, you can better market to VA buyers. Here are some tips:
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Highlight features important to military families like storage space, versatile floorplans, and low maintenance.
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Advertise proximity to bases, VA hospitals, good schools, and military hubs.
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Make sure listing photos showcase cleanliness and give the home a light, bright, spacious look to meet MPR expectations.
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List during peak PCS seasons in the spring and summer when more military families relocate.
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Work with a real estate agent experienced with VA buyers who can properly advise and reassure you throughout the sale.
Seller Requirements Summary
To summarize the key requirements when selling to VA buyers:
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The home must pass VA minimum property standards and appraisal.
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The buyer can request repairs for MPR deficiencies, though repairs are usually minor.
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You may offer closing cost concessions up to 4% of the purchase price.
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VA buyers typically pay the funding fee, but you can negotiate to pay it.
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Focus your marketing on what matters most to military and veteran buyers.
Should You Accept a VA Offer?
With the facts on VA loans, you can make an informed choice when you receive a VA offer. There’s no reason to automatically reject or steer away VA buyers.
In fact, VA buyers have distinct advantages thanks to their buying power, likeliness to close, and relaxed lending guidelines. Widening your buyer pool to qualified service members and veterans also supports military families in your local community.
Understanding the seller’s side of VA loans allows you to better evaluate any VA offer that comes your way. While every home sale involves some compromises, VA buyers make excellent prospects who enable you to successfully sell your house.
Frequently Asked Questions
Can sellers refuse a VA loan?
Sellers can turn down any offers they want to, including VA buyers. However, excluding VA buyers removes highly qualified purchasers from your pool.
Do VA appraisals kill deals?
Not necessarily. Most homes readily meet MPRs with just minor repairs, if any repairs are needed at all. It’s rare for MPR deficiencies to obstruct a sale.
How long do VA loans take to close?
VA purchase loans take around 45 days on average to close. This is only slightly longer than conventional loans at 42 days. VA refinances can be even faster, averaging just 25-35 days.
Who pays VA funding fee?
The buyer pays the VA funding fee in most cases. However, the seller can offer to cover all or part of it through closing cost concessions to incentivize the buyer.
Can sellers pay VA closing costs?
Yes. Sellers can provide closing cost concessions up to 4% of the sales price to VA buyers. These concessions can include paying for the VA funding fee.
Selling your home can be challenging, but VA buyers make excellent prospects. Understanding requirements like the VA appraisal process and maximum allowable concessions for VA buyers empowers you to handle a VA purchase seamlessly. A smooth sale enables you to move forward and complete the next chapter in your life.
Re-Establishing Your VA Entitlement
If you’re a veteran and your entitlement is running low, don’t worry, as it’s possible to restore what you had before. Here are three steps that can help get the job done:
- Sell Your Original Property & Repay Your Current VA Loan: You can sell the original property and pay back any outstanding balance on your current VA loan in full. This will give you a fresh slate for restoring your entitlement.
- Invoke Qualifying Veteran Assumption: If another qualified Veteran wants to assume your existing loan and substitute their entitlement for yours, this could be an ideal solution for both of you involved. However, make sure all qualifications are met beforehand so there aren’t any surprises down the road.
- Refinance into Non-VA Product & Use “One-Time Restoration of Entitlement”: You could also refinance your existing loan into a loan package that is non-VA related while also invoking “one-time restoration of entitlement.” An expert can help you make this process happen.
The easiest option is to sell your existing home, pay off your mortgage, and restore your entitlement that way. We can work with you to make this happen.
Meet Minimum Property Requirements
The US Department of Veterans Affairs sets out MPRs in order to guarantee a property’s safety, soundness, and sanitation, so here’s what you must know:
- Space Requirements: Every home must have adequate living space, sleeping areas, cooking, and dining areas. They also need to have enough bathrooms for everyone in the home.
- Access And Encroachments: The property should be accessible via public roads or an HOA-managed private street that has a permanent easement.
- Hazards: The home has to be free from potential hazards, such as lead, asbestos, and radon gas contamination.
- Water Supply, Sanitary Facilities, And Sewage Disposal: There should be consistent access to clean, potable drinking water, safe plumbing, and proper sewage drainage.
- Utilities: All You Need To Know: The house must have proper access to an HVAC system, electricity, and gas that are both safe and reliable. There has to be a reliable source of heat during the winter as well.
- Home Structure Matters: The roof must still have at least three years of life left on it. Not only should your roof be resilient enough against moisture, but it should also free from any immediate maintenance needs. The house must also be free from mold and mildew, which can be found anywhere but are frequently found in basements and crawl areas.
- Pest Control & Deterioration Checkup: The inspection team will also look for any potential deterioration due to termites or pests. This includes dry rot, which could lead to major structural issues within the home if not taken care of quickly.
This is just a brief overview of some of the minimum property requirements that have to be met before the house can be sold.
You may want to work with an expert who can help you identify and address these issues before you put your house on the market, as you do not want them to impact any potential sale that might be pending.
When it comes to selling your house, you’ve got a lot on your plate with a VA appraisal vs. home inspection. One of the most important steps is getting a VA appraisal and understanding what it means for you.
A VA appraisal assesses the fair market value of your home and gives lenders an idea of how much collateral they have should something go wrong down the line. But there’s more than just money at stake; appraisers also make sure that all safety, sanitation, and property standards are met so that veterans won’t be put in harm’s way.
The VA appraiser will take a look at many of the factors listed above, but they also focus on the overall value of your house compared to a potential loan.
Keep in mind that a VA appraiser is not a home inspector. A home inspection is likely to be more thorough, as they will look at everything. A VA appraiser looks at the value of the home and some of the minimum criteria listed above.