VA Loans - and My Dilemma

[Raphael]

If th govt is payin for a house.....I guss they want to make sure its 100 percent pristine?

but some of their non-negotiables would destroy the character look of CP's house.

[Cow Poke]

but some of their non-negotiables would destroy the character look of CP's house.

Come to think of it, "government housing" never really has a "character" that's ... um... desirable.

[Carrikature]

but some of their non-negotiables would destroy the character look of CP's house.

Which CP cares about but the buyer may not. I more or less like my house, but it's certainly not because of the previous owner's 'character look'. Most of that is getting ripped out.

[Raphael]

Which CP cares about but the buyer may not. I more or less like my house, but it's certainly not because of the previous owner's 'character look'. Most of that is getting ripped out.

That is a good point. I remember one house that had massive prize winning rose bushes. new owner ripped them right out.

And I've already told you about the lovely koi pond with waterfall my brother's old place had that has been filled in. .... infact from what I can tell on google maps and streetview none of our places look like they used since we all emigrated 9-10 years ago.

[Cow Poke]

Actually, I don't care so much about what the house will look like after we sell it - it's "back in the woods", and I won't have occasion to just "drive by" and see how the new owners are treating it.

It's more of a "whole bunch of requirements" to solve a problem that doesn't exist. House is being treated quarterly for pests, including termite monitoring, and in eight years, ZERO termite activity was found anywhere near the house. The "mulch must not be closer than 18" to foundation" and "all vegetation must not be nearer any part of the structure than 18"" is just silly when you live "in the woods".

It's a classic government solution in search of a problem. We have a screened-in back porch which is surrounded on two sides by shrubbery which provides a nice privacy element - but there's no way to trim them 18" away from the screen without destroying them.

But, again, that's not the real problem - the biggest problem is that the sale price doesn't matter a whit! They can offer the highest price (we now have 3 offers on the house, so we have asked for a "highest and best" reconsideration from each, given the competition) but they are not allowed to pay more than the appraised value based on an appraisal that I pay for. Now, if their appraisal comes in too low, I have the option of countering it with the appraisal I already paid for, but that's still about 12,000 lower than the asking price. I believe one of the potential buyers, because they really want the property, is going to exceed the asking price.

It just irks me that this veteran doesn't have that option. (Unless, of course, he switches financing to a conventional loan, which would require much more up-front money)

[Carrikature]

The appraisal thing confuses me. Both houses I've bought with conventional loans had to be appraised by the bank as part of the process. I think the price was rolled into my mortgage, but I'm not sure. My co-worker is struggling to get his house re-financed because they keep botching the appraisal process (comps can be hard to come by here).

[Cow Poke]

The appraisal thing confuses me. Both houses I've bought with conventional loans had to be appraised by the bank as part of the process.

And the bank would only finance the appraised value (or thereabouts) leaving you the freedom to kick more cash in if you wanted the house, and the seller was not accepting the "appraisal" value.

I think the price was rolled into my mortgage, but I'm not sure. My co-worker is struggling to get his house re-financed because they keep botching the appraisal process (comps can be hard to come by here).

One of the (if not the primary) reasons somebody does a VA loan is that zero money is needed as down payment. If they cannot afford the down payment, they're likely not able to afford the difference in cost between the selling price and the appraisal value.

[Sparko]

And the bank would only finance the appraised value (or thereabouts) leaving you the freedom to kick more cash in if you wanted the house, and the seller was not accepting the "appraisal" value.



One of the (if not the primary) reasons somebody does a VA loan is that zero money is needed as down payment. If they cannot afford the down payment, they're likely not able to afford the difference in cost between the selling price and the appraisal value.

well I think your choice is made for you. You can't sell to the VA loan. You could talk to the vet and explain that you would like to sell to him but you can't accept the terms of the VA contract, so if he could get regular financing, you would sell to him. If he can't do that, then you have to sell to someone else.

[Carrikature]

One of the (if not the primary) reasons somebody does a VA loan is that zero money is needed as down payment. If they cannot afford the down payment, they're likely not able to afford the difference in cost between the selling price and the appraisal value.

I generally figure that if you can't afford a down payment, you can't afford a house.

[Cow Poke]

I generally figure that if you can't afford a down payment, you can't afford a house.

And I agree - making housing "affordable" by making it "easy" is unfair to the prospective home owner. It will be a struggle to keep 'affording' the house once they have obtained it.

[Cow Poke]

well I think your choice is made for you. You can't sell to the VA loan. You could talk to the vet and explain that you would like to sell to him but you can't accept the terms of the VA contract, so if he could get regular financing, you would sell to him. If he can't do that, then you have to sell to someone else.

That's pretty much what it's looking like, yeah.

[Cow Poke]

This just in!

OK, there's a provision in the VA loan document which was added in which says...

The buyer shall have the privilege and option of proceeding with consummation of the contract without regard to the amount of the appraised valuation or the reasonable value established by the Department of Veterans Affairs.

If the VA financing is involved and if Buyer elects to complete the purchase at an amount in excess of the reasonable value established by the VA, Buyer shall pay such excess amount in cash from a source which Buyer agrees to disclose to the VA and which Buyer represents will not be from borrowed funds except as approved by the VA. If VA reasonable value of the property is less than the sales price, seller may reduce sales price to an amount equal to the VA reasonable value and the sale will be closed at the lower sales price with proportionate adjustments to the down payment and the loan amount.

So, contrary to the first round of contract, buyer has the option to pay more than the appraisal if the appraisal comes in too low. This gives some leeway that didn't exist in the first round of contract.

I'm thinking I might do this.

[Cow Poke]

OK, for anybody who cares.....

I went with the VA loan buyer, assured that this "wasn't that big a deal".

I really think I'm being taken advantage of.

They did their home inspection, within the option period, of course, and accidentally sent us a copy of the entire inspection report. (They meant to just send a summary) It wasn't nearly as scary as I thought it might be. A bunch of nit picky things that most any homeowner could fix, but some special highlights regarding VA requirements.

We have already put in $15,500 worth of new privacy fence, new carpet, new laminate floors, new tile in the entry way... I had already mediated a lot of wood rot (typical for an older home in the Gulf Coast humid region) on the main house, but there's some more work that could be done on the garage apartment and another out building.

We had started with a sale price of $419,000, but reduced over time to $374,900 (based largely on the appraisal I paid for, because we didn't really know if we were "in the market" or not)

This is just for the main house, garage apartment, 50x70 metal shop, and 2 acres.

So, here's the kicker....

KNOWING that the VA is going to push for a sale price not exceeding the buyer's appraisal (for which I have to pay!), the buyer is STILL demanding a whole bunch of "fix-its" that would cost me an additional $4,000 or so. On top of that, they want a $3,500 allowance for a water heater that is old, but still works fine.

It just feels like it never ends. I WANT to help this Veteran, but it SEEMS like he could understand that the deck is already stacked against me selling an older home on a VA loan, with all the requirements they add. I just informed my agent that I'm really not thinking I can justify this deal any longer.

What I'll probably do is revert to a "you signed a contract for 'as is' house" stance, and only concentrate on the stuff the VA demands to make qualify the loan. If he's OK with that, this deal might still be salvageable.

And, again --- I just feel like, in attempt to "help a Veteran", this particular government program makes it all but impossible for him to buy my older home.

[37818]

. . . they want a $3,500 allowance for a water heater . . .

Is that a commercial grade water heater?

[Bill the Cat]

CP, the new federal regulation for water heaters requires more insulation than the older water heaters have. My brother is a plumber and explained that to me. The water heater you have probably isn't up to current code, so they may want one that is.