“Why does everybody hate VA loans?” Background info and what all investors need to know about VA loans.

by | Indy Anna, Real Estate Investing

“Why does everybody hate VA loans?” Background info and all investors need to know about VA loans.

I was recently asked why “everybody hates” VA loans and I didn’t have a good answer to explain the negative attitude that many folks in real estate have about VA loans.  As a real estate investor, realtor, agent, buyer/seller representative, etc. you should know the whole story about VA loans.

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“Why does everybody hate VA loans?” Background info and all investors need to know about VA loans.

Why are some agents, investors and sellers anti VA loans?

Is this a misconception or a mistake costing folks hundreds of thousands each year, or is the VA loan type evil and something to stay FAR away from?

Today Indy Anna explains:

Why are some people so anti VA loan?

Should you avoid VA buyers at all costs?

The secret pool of buyers many overlook?

As I always say I’m still pretty new to real estate so please let me know your thoughts and if I missed anything:
– When I first heard the negative attitude that many people in real estate towards VA loans, I didn’t understand it
– At first I thought maybe it was just me 
– Recently a client asked me “Why does everybody in real estate hate VA loans?”
– I didn’t have a good answer so I did some research, asked around and did some interviews and this video is the answer to all that
– Again I’d love to hear your feedback and this wasn’t just Indiana real estate folks, this was people from all over who had the same attitude

So today we will go over a rundown of VA loans:
– First what they are and how they work
– Next we’ll go over why realtors/investors and others “hate” them
– Last we’ll talk about some missing information that can make this a goldmine for you

So it’s come across more than once: “Oh… They’re using a VA loan?” or “No FHA/VA” on a listing (we can cover FHA later on) A seemingly entire market against VA loans- or at least giving VA loans a pretty harsh stigma.

Why?

What are VA loans?  The background:

VA loans are designed as a benefit to those who have served in our Armed Forces a means of affording housing – a definitive benefit to their service. In years past these loans have come with more red tape, hassle, time constraints and deals fallen through than conventional loans- giving them a bad wrap.

Honestly, it does seem like many sellers will receive an offer from buyers and when there are multiple offers on the table, an agent might suggest to them “go with the one that’s not a VA loan”. To be REALLY
honest, buyers with a VA loan might not even have their offer hit the table as the agent has intercepted ahead of time and advised their client to list with “no FHA/VA” from the gate.

But WHY? Here’s where VA loans have been issues in the past;

Super slow appraisal times.

Sellers paying more for closing.

Mega red tape hassle causing delays

Let’s break each one down and look at the REALITY:

Keep in mind VA loans have been around since 1944 when Congress created it.  VA loans have had some hagnups in the past but those have slowly come to resolve over the years.

First the “slow appraisal” part:

Beginning with the appraisal portion itself- the VA recognized the issue offering appraisers $500 per  appraisal and bumped it up to $800.  This has helped expedite the process.  Another move here in power plays of getting appraisal cranked out faster than before; the VA has come up with ‘Minimum Property Requirements’

These are pretty much right in line now with average conventional appraisals, those requirements are things like:

Plumbing, heating and electrical systems safe and working.

Roofing adequate.

Loose paint scraped/repainted.

No leaks/decay/excessive dampness.

No termites, fungus, destructive insects/dry rot.

That’s pretty basic really and not more ‘demanding’ than most conventional loans.

So they’ve sped up the process by paying more for appraisals and cutting down the checklist of items on the appraiser’s job. “We are going to pay you more to look for less” – is working for speed.

Costing the seller more?  Well…

As for a VA loan costing a seller more… well that’s going to be in how you work it out on the transaction. Sellers are NOT required to pay closing costs. Honestly this portion is going to fall under the agents
involved.

Buyers agents realize that in a competitive market – having a counter with concessions (any at all, but let alone up to the 4% allowable) is going to put your offer on the back burner pile from a convection without concessions.

So a good buyers agents can deal with this and make a compelling offer with or without the 4%.

For listing agents, same goes. Accepting an offer with seller concessions is obviously going to cost your clients more- but it’s NOT required. Option would be to not accept the offer or counter w/o concessions OR in really competitive markets realize this; VA buyers with zero down are going to have more wiggle room in loan sometimes.

Buyers/buyer’s agents  OFTEN realize that coming in with a VA loan is counterproductive in speed based on reputation alone and will offer MORE than asking to compensate for either knowing they are asking for seller concessions or simply to sweeten the pot for the seller.

In other words, an extra $3K upfront could be paid by the offer coming in at $3K over asking from the start (not an unlikely situation at all) 

I know I sound like I’m trying to convince people here, but I come from a military family so I’m a little biased.
– Every time I kept hearing how much of a “pain” VA loans were I asked for details
– When I get the details I always “That’s it?”
– These are small things to deal with and often these buyers don’t have much money or support from their family so even if we do just a LITTLE more work, it’s worth it

So what is really the biggest difference apart from appraisal & closing costs stigmas? Well basically it comes down to a termite inspection.  Seller will likely have to pay for a termite inspection… a whopping $165 on average (I found some at $50, others at $280- added up/2 for low end high end price points)

That’s the costing ‘so much more’ you (as a seller) could be facing – $165. Is it worth turning away an offer or an ENTIRE pool of buyers by listing as “no FHA/VA” from the start?

Here’s the secret – NO, it’s not worth it.

By deciding not to work with VA loans or turning down a VA offer – you are turning away from at MINIMUM 100’s of local buyers.  If a property is listed near a base where active and retired military members may be, you’re turning away THOUSANDS of buyers.

And these are SOLID buyers- as soon as the appraisal is done- these folks are ready to rock and roll – seems like a no brainer to us and we HIGHLY recommend working with VA loan buyers.

I talked about this with one of the top “military” realtors in Indy and even he said that he didn’t deal with VA loans lol.  I took a few of his houses and we moved them pronto WITH VA LOAN BUYERS and was a snap. 

I don’t know if this will change his stance but it should.

Like I said maybe I’m missing something, please let me know if I am but I’d say that if you call 10 realtors/investors at least 7 of them will say they hate VA loans and don’t want to deal with them.

I’m testing a new Policy Set around this to help adjust attitudes about this, so the following is a collection of the best practices that are working for me and the best agents real estate folks doing VA
loan deals:

Bonus checklist for agents and investors:

– Have your title/escrow company ready to go and make sure they are VA
loan familiar

– Have your list local termite inspection providers ready

-Have your network of VA lenders ready (make sure they are address specific pre approval letter ready as your VA loans may be higher in amount they can lend for vs what is needed and we do not want to show
all of the cards we have to play!   Due to lower credit score requirements, this is another veteran benefit YES)

-Have your network of Home Warranty providers ready (since you’re already in good with the VA   lenders, make sure they have options for your clients ready to roll home warranty costs into loan)

– Have your fully customizable ‘love letter’ to sellers ready for submission with all VA loan offers (feel free to use points from above about how far VA loans have come)

Make sure to send this in with THREE pictures: one of the buyers in their military uniform, one of them on duty “working” with others and one of them with their family.

So to recap:

-We covered why some people are anti-VA loan

-We covered why as a seller, seller’s agent, selling investor you should NOT put VA loan buyer’s offer out of the running

– Secret ‘pool’ of buyers many agents and sellers overlook

– BONUS checklist for agents

Also for more on this and others that can help you get your head of your a** about VA loans go to https://www.BigReia.com/people.

Thanks!  = )

~ Indy Anna

 

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~ Indy Anna
Love (at) BigReia.com
(YES that's my actual Direct Line and I really do answer lol, so please text me first Thx!)

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