Why your VA offer isn’t getting accepted. Episode #276
Hello. Welcome to Todd Miller TV. The question today is, “Why isn’t your VA loan, your offer that you’re making on a property with a VA loan getting accepted?”
So to go through some of the reasons, first off, if you are using a VA loan, that means you’re a veteran. I want to thank you for your service. I too am a veteran and I have 14 years on active duty and I actually used the VA loan twice to purchase property. It’s a great deal. OK.
So in today’s market right now, it’s very competitive. All over the country, not just here in Las Vegas but in California and other parts of the country, very competitive.
Now a VA loan is 100 percent financing. What that means is that the purchase price and the loan amount are going to be the same. So I will give you an example. Let’s say that you’re buying a house and it’s a $100,000 house and you made an offer for $100,000 VA.
There were other offers on the house, maybe FHA offers. They’re putting 3.5 percent down. Maybe conventional offer to putting 20 percent down and the cash offer. They’re just going to take cash for the whole thing.
Well, the VA of all of those has the strictest criteria. First of all, the VA loan is going to have a much more stringent inspection on the property. If they see a little leak from the toilet, they’re going to say that has to be fixed whereas other loan programs aren’t going to be that stringent. The inspector might see them but they’re not going to like stop the loan. OK?
The second thing is the VA appraisal is potentially going to be more stringent. So if that house appraises at a lower amount, then the sellers got a contract for 100,000. Let’s say it only appraises for 95,000. Then if the buyer has to come in with the difference or the sellers got the lowest price, well the sellers a lot of times don’t even want to go down that road, meaning they don’t want to wait 60 days to find out that it didn’t appraise. Then move forward.
So what they tend to do is they tend to like cash offers first, conventional offers second, FHA third because there is that 3.5 percent margin in there and the VA tend to like that the least. OK?
So you’re probably saying that, “Todd, if it didn’t appraise, then it’s not worth it.” Well no. I’m going to do a blog with an appraisal. We’re going to talk about that because if you get 10 appraisals, it will all be different. They’re not always going to be the same. OK? It’s just an opinion of value. It doesn’t make it more than it is. It’s not like a government stamp of magical value.
If that was the case, we would do appraisals before relisting and we would just say this is the appraised value. This is what it is. Just send us the offer and it will automatically be accepted because we know what the appraised value is.
But it doesn’t work that way because we could cancel that deal, get an FHA offer. They will get a whole new appraisal and that new appraisal could be completely different and a lot of times, sellers will do that.
So here are a couple of things you can do if you want your VA offer accepted. First of all is make sure you put in there if it doesn’t – there’s a difference between the appraised value and the purchase price, that you have funds available to make up the difference if you really want the house.
You’re still paying 100,000 for this house even if your appraisal is for 95. You’re just getting a loan for 95,000 instead of 100 so your payments will be less every month. They will be a little less. You have to put $5000 more upfront.
When you sell the house, you get the five grand back because let’s say the house – assuming it appreciates and sell for 130, instead of getting $30,000 back because your loan is 100, you will get 35,000 because your loan is only 95,000. That’s one thing you can do.
Another thing you can do is you can agree to negotiate the repair cost a little differently. For example, let’s say that you say you want $1000 of repairs. What you can say is, “I only want $500 of repairs but that’s only things that meet, that require. They’re required under the VA loan program.” So let’s say they find that there’s some problem, but the VA says, “No, we will fund with that,” you just tell the person, “We won’t. We will fix it after close of escrow on our own time.”
So just make that repair cost only to satisfy the loan requirement. Don’t make them just generic and then try to grab that money. You might be able to pay your own home warranty. There’s some things you can pay on your own, some things you can’t pay. Like, you can’t pay the escrow fee which is one reason why the sellers a lot of times don’t want to take that VA buyer.
So talk to your agent. Find a strategy. Remember it’s a great loan program for veterans. It’s 100 percent financing essentially but there are some disadvantages when you’re a seller and you’re looking at that and you’re saying, “This could be a 60-day close of escrow,” et cetera.
One last thing, you should have the strongest pre-approval possible. I mean it should say not just pre-qualified but completely pre-approved. The only thing we need is a VA appraisal to fund something like that. Someone is texting me here.
So that’s my advice if you have a VA, if you’re writing offers on a property to get something accepted. Anyway, that’s my video for today and hope to see you in another video. Thanks.