Booming Housing Market Poses Risks for Veterans Using VA Loans
VA home loan benefits are geared towards protecting VA homebuyers throughout the buying process. Those protections are making it more difficult to buy using a VA loan.
The Housing Market is Uber Competitive
Competition drives markets. Many sellers competing for few buyers drives prices down. Many buyers competing for a few sellers drives prices up. Unfortunately, if you’re a homebuyer right now, the latter is likely what you’re experiencing.
Although many Americans are still not working due to the COVID-19 fallout, that’s not stopping the ones who are from snatching up homes. Home prices have risen at record rates over the last few years. Any thought of the pandemic causing a housing crash has generally been ignored by the American public. If you’re in the market for a home, you better be ready to move quickly and be prepared to pay. And if you’re using a VA loan, know going in that your patience will be tested.
VA Loans are Awesome
The Department of Veterans Affairs (VA) is dedicated to serving veterans and service members, providing benefits earned through service to our country. Over a million homeowners annually use the VA home loan benefit to purchase or refinance their primary residence. The home loan benefit provides financing with no down payment requirement, no loan limit - other than for what the family qualifies financially, and has safeguards built in to protect the homebuyer from purchasing a lemon. It’s that last part that has caused frustration for many VA eligible homebuyers shopping in a hot market.
All Offers Are Not the Same
The housing market is blazing right now in many parts of the country, and it is common for a newly listed home to have multiple offers pour in in a matter of days, some of which are thousands of dollars above the listing price.
While price is always a leading factor sellers consider when choosing a buyer, it is becoming less so as getting offers over asking price becomes commonplace. Sellers are beginning to consider the path of least resistance more and more when considering multiple offers. This can put VA homebuyers at a disadvantage in the eyes of some sellers and real estate agents.
VA appraisal requirements and the perception many real estate agents have regarding the time they take to complete often have them persuading sellers to consider more conventional financing options. If there are all cash offers on the table, oftentimes they’ll come with no appraisal or inspection requirements. Such offers are extremely difficult to compete with.
What can you do as a VA homebuyer to get your offer accepted?
The reality is an all cash offer that can close quickly with no inspection or appraisal is probably only going to get beat by a higher offer with the same nonexistent contingencies. If you’re up against that, it’s probably best to move on and find another home. While that situation is not uncommon, it doesn’t happen often enough to give up all hope.
The easiest way to avoid appraisal and inspection issues is to shop for homes that have been well kept where the seller is confident no inspection or valuation issues will occur. After all, if the seller is worried about an inspection, the buyer should be concerned, too.
It is always important to be preapproved for your VA loan before you make an offer. However, sometimes a preapproval letter is not enough. While your credit scores and financial position outside of the homebuying transaction are not the seller’s business, disclosing a high FICO score and significant savings may convince a skeptical seller that your VA loan will close.
Some agents recommend including a personal letter with your offer. Sellers are people, too. Sometimes there are sentimental reasons a seller may favor one buyer over another. A seller may choose to sell a home where they raised their family to a veteran hoping to do the same rather than a soulless investor trying to capitalize on a hot real estate market.
VA loans are possibly the best mortgage loan available, and the right to obtain one is earned by serving our country through military service. Many sellers don’t think about this when reviewing offers. Negotiations are more emotional than objective for most people. A friendly reminder that the person on the other end of an offer is a service member who made a choice to serve their country can’t hurt.