Over 140,000 active-duty troops, veterans, and retired service members reside in the greater Colorado Springs area, constituting over a third of the city’s adult population. Therefore if you’re selling a home in El Paso County, you will likely receive an offer from a VA buyer. Historically, home sellers have been wary of VA loan borrowers due to red tape, but now VA loans are highly competitive and can be a great option for both buyers and sellers.
At the Reichert Mortgage Team, we aim to provide comprehensive mortgage education to home buyers and sellers so they can feel confident in their home loan decisions. As a veteran myself, I’m here to address several myths about working with VA loan borrowers. We want to empower you to sell your home seamlessly while allowing a deserving veteran to find the home of their dreams.
Selling your home can be stressful enough without adding the complexities of VA loans to the mix As a seller, you want the smoothest sale possible Understanding what to expect when selling to a buyer using a VA loan can help make the process seamless.
What is a VA Loan?
VA loans are mortgage loans guaranteed by the U.S. Department of Veterans Affairs. They allow eligible military service members, veterans, reservists, and certain surviving spouses to purchase a home with no down payment.
VA loans offer significant advantages to buyers including
- No down payment required
- No monthly mortgage insurance premiums
- Flexible credit guidelines
- Ability to roll closing costs into the loan
- Low interest rates
With benefits like these it’s no wonder VA loans are popular. In fact, the market share for VA loans reached a record high in 2020 at just over 13%. As a seller there’s a good chance you’ll encounter VA loan buyers. Being prepared can prevent headaches.
Top 3 Things to Know When Selling to a VA Buyer
As the seller, here are three key things to understand:
1. The property must pass the VA appraisal and meet Minimum Property Requirements.
For a VA loan to close, the property must pass a VA appraisal. This is more stringent than a conventional appraisal. The appraiser checks that the home meets VA Minimum Property Requirements related to safety, security, functionality, and habitability.
As the seller, thoroughly preparing your home for sale and being proactive with inspections and repairs can prevent appraisal issues.
2. There are non-allowable fees a buyer may ask a seller to pay for.
VA guidelines prohibit the seller from paying certain fees for the buyer. As a seller, you cannot pay for:
- VA funding fee
- Discount points
- Prepaids (insurance, taxes, etc.)
However, many allowable fees can be negotiated like any other transaction.
3. VA guidelines allow sellers to pay up to 4% of selling price in concessions.
VA allows sellers to pay reasonable closing costs on the buyer’s behalf as a sales concession. Up to 4% of the sales price can be used.
As a seller, understand what costs you can and cannot pay if the buyer requests closing cost assistance.
Preparing Your Property to Sell to a VA Buyer
Minor repairs and deferred maintenance can derail a VA appraisal. As a seller, take steps to get your home in top shape before listing:
Conduct pre-inspections – Hire a professional home inspector familiar with VA requirements to identify any deficiencies early. This allows you to make repairs before going on the market.
Make repairs – Focus on any safety, functionality, or hability issues identified in the inspection. Cosmetic fixes can also increase appeal.
Check major systems – Ensure plumbing, electric, roof, HVAC, appliances, etc. are sound and working properly. Replace or repair aging or defective systems.
Improve curb appeal – A fresh coat of paint, new landscaping, exterior repairs, and other aesthetic improvements help your home shine.
Clean and de-clutter – A clean, tidy, and de-personalized home allows buyers to imagine themselves living there.
Stage your home – Professionally staging your home highlights its best features and space functionality.
Taking these steps allows you to proactively address conditions that could cause a VA appraisal to fall through.
Marketing Effectively to Attract VA Buyers
Your marketing materials and listings should appeal to the needs of VA loan buyers. Useful tips include:
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Highlight proximity to military bases or veteran amenities – This signals your home as a good fit for military families.
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Use keywords in listings – Words like “VA approved” or “passes VA requirements” can help attract VA loan buyers.
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Advertise in military publications – Print and online military housing guides and newspapers are great for exposure.
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Offer a Veteran’s or Military Benefit – A credit at closing or payment of non-allowable closing fees is attractive.
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Use high-quality photos and videos – They allow buyers to thoroughly view your home remotely while on tight timelines.
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Be flexible with showings – Military buyers move fast, so accommodate short notice or early/late showings.
These strategies make your listing stand out to service members and veterans searching for their next home.
What to Expect During a VA Appraisal
As the seller, you should expect the VA appraisal process to be more rigorous than a conventional appraisal. Here’s an overview:
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In-depth inspection – The appraiser does a thorough interior and exterior inspection checking for defects that don’t meet Minimum Property Requirements. Cosmetics typically don’t factor in.
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Market analysis – Recent closed sales of comparable homes are analyzed to determine fair market value. List price isn’t considered.
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Systems checked – The functionality of systems like plumbing, electric, HVAC are assessed. Upgrades may be recommended.
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Paperwork verified – Documents like inspection reports, disclosures, HOA info, floor plans, etc. will be reviewed.
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Follow-up requested – If any issues arise, the appraiser may request additional info or repairs before finalizing the report.
While strict, a quality VA appraiser helps ensure homes meet standards and are fairly valued. As a seller, being cooperative and responsive facilitates the process.
Negotiating With a VA Buyer
When negotiating with a VA buyer, a seller should keep a few things in mind:
- Stick to allowable fees for concessions
- Consider providing a veteran’s benefit if possible
- Be flexible on timelines and closing dates
- Understand the buyer’s out-of-pocket costs may be limited
- Don’t make generalizations about what VA buyers can/can’t do
- Negotiate as you would with any buyer
The buyer’s VA financing provides advantages, but it also has limitations. Knowledge helps you negotiate effectively for a win-win sale.
Why Sell to a VA Buyer?
Selling to a buyer using a VA-backed loan has many benefits as a home seller:
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High success rate – VA loans historically have low fallout rates, meaning they are likely to close.
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Flexible sellers – VA buyers know sellers have the upper hand in competitive markets and may negotiate to win the home.
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Lender appraisal – The buyer has less control to push for an inflated appraisal, keeping valuations fair.
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Loan stability – VA loans themselves are assumable and transferrable providing future marketability.
While unique considerations exist, VA buyers make stable, qualified purchasers for your property. Taking steps to understand the VA loan process as a seller sets you up for success.
Selling Your Home with Ease
Any home sale comes with complexity. But arming yourself with knowledge of VA loan requirements as a seller prevents unwelcome surprises and disruptions.
Preparing your home for the appraisal, marketing strategically to attract buyers, and knowing guidelines allows you to negotiate from a position of strength. Approaching the transaction educated and informed lets you maximize your bottom line while helping VA buyers achieve homeownership.
The VA mortgage provides a valuable benefit to those who served our country. Understanding how to best market to and work with VA buyers gives you an advantage while helping veteran and military families attain the dream of homeownership. With the right preparation, you can sell your home smoothly, quickly, and for top dollar, even with a VA loan buyer.
What are VA Loans?
VA Loans are established and guaranteed by the government to assist active and retired military personnel purchase housing. The VA does not originate VA home loans but does set eligibility requirements. Instead, veteran buyers work with a VA-qualified lender.
VA loans require a $0 down payment and often accept lower credit scores than a conventional mortgage. They also don’t require private mortgage insurance. Over the past 75 years, VA home loan benefits have increased. For example, as of 2020, veterans with full entitlement no longer have a loan limit.
For VA borrowers, the steps in getting and using a VA loan will look something like this:
- Pre-qualify: A VA lender will get an estimate of the type of house the buyer can afford based on income, credit, and entitlement.
- Get pre-approved: Mortgage lenders will verify income and other financial information to determine the purchase price. A pre-approval letter is essential to show real estate agents and sellers.
- Make an offer.
- Get a VA appraisal: This is a requirement of VA mortgages and determines that the house meets fair market value and the Minimum Property Requirements outlined by the VA.
- Close: After underwriters evaluate the buyer’s financial information, the VA loan will close.
The VA appraisal process gives some home sellers pause, but if your home doesn’t pass the appraisal, you can make repairs or concessions to still close the sale.
Common Myths about Selling to a VA Buyer
Though the VA appraisal process can be a bit tricky to navigate if you aren’t prepared, that’s really the only disadvantage of selling to a VA buyer. Here are a couple of other common myths that make sellers wary of VA buyers:
VA Loan Secrets: Using Seller Concessions (advanced strategies)
FAQ
What are the disadvantages of a seller accepting a VA loan?
What does a seller pay for a VA buyer?
Should I sell my house to a VA buyer?
Is earnest money required for a VA loan?
Should you sell to a VA home loan buyer?
In general, selling to a VA home loan buyer is no different than selling to any buyer. These VA buyers are actually more reliable than most other buyers. However, some differences do exist. And, by understanding how to prepare to sell to a VA home loan buyer, sellers put themselves in the best situation to close a home sale.
What should a seller do when working with a VA loan?
When working – or potentially working – with a VA loan, sellers should complete the following tasks. The VA home loan program exists to promote veteran home ownership. Consequently, the program imposes Minimum Property Requirements, or MPRs, that all properties must meet to qualify for a VA home loan.
Do veterans use the VA loan when buying a home?
Veterans or active duty military home buyers are likely to use the VA loan when purchasing a home. What is the VA loan? For those of you unfamiliar with it, the Department of Veterans Affairs helps those who are eligible purchase a home at a competitive interest rate, often without requiring a down payment or private mortgage insurance.
What happens if a seller pays a VA loan in full?
In a typical purchase transaction, the buyer is getting a mortgage to purchase the home, and the seller is using the proceeds to repay their loan in full. The seller transfers the financial obligation solely to the buyer, and the seller can restore their full VA loan entitlement once their VA loan is paid in full.