Buying a Short Sale Home with VA Loans
Are you wondering about buying a short sale home using your VA benefits? Simply stated, a short sale is made possible when the owner of a home becomes delinquent on their loan, and the lender decides to allow the current owner to sell it for less than the remaining loan balance. Lenders are typically open to negotiations of a short sale when the loan balance exceeds the property’s market value, and the borrower and mortgage lender hope to avoid foreclosure. It is possible for Veterans to purchase a short sale home using a VA-backed mortgage, as long as the home meets VA guidelines. For example, the VA requires that the home be in “livable” condition. The proposed sale price must also justify the insured value of the home. Read on to learn more about the VA home loan short sale process!
Veterans can qualify and get approved for short sale homes as long as certain requirements are met. Appraisal requirements, for example, are very strict, and the VA will only back short sale homes that are in livable condition. This means that any necessary repairs will have to be made to make sure the property is livable, and this expense can fall onto the buyer. A bank will accept or reject a short sale offer based on a comparative market analysis of property value that justifies the sale amount.
Potential Disadvantages of Short Sale Homes
While not all short sale homes are sold below their current market value, it’s not unusual to find a heavily discounted home. However, there are also some potential disadvantages to consider when using a VA home loan to buy short sale properties. Every situation is different, but these types of houses can come with their own set of problems. Short sale homes are sold “as is,” so the buyer will have to take on the responsibility of fixing any existing structural damage, pending repairs, and some cosmetic issues.
Another disadvantage is that offers can take a long time to process. It’s not uncommon for it to take several months for a buyer to get a response from the seller. For one, not all real estate agents are experienced in short sales, and not all agents are experienced in short sales and VA loans. You will want to choose an agent and broker with experience in both areas. The reason is that an inexperienced agent will not be able to advise the seller properly, and might not know how to work with the bank’s often complicated process of handling short sales and the tremendous amount of documentation required for a successful transaction. For example, the seller is required to submit a short sale “package” to the bank that details their financial situation, upwards of hundreds of pages, many requiring signatures and up-to-date financial information. Delays are created when documents are not submitted with the proper data, and the bank cannot review a seller’s finances or make a decision about the prospective short sale until all required documents in the package are current and correct.
What Should I Expect?
When beginning to look for short sale homes, we highly recommend working with an experienced broker or real estate agent, a person or company to help you navigate the VA home loan short sale process. An experienced agent will know how to find listings of short sale homes and how to negotiate a good deal. It’s a good idea to get pre-approved for a mortgage very early in the process so that the banking institutions involved in the transaction know that you are a serious and financially credible buyer. Be sure to create a purchase offer that includes your pre-approval letter, proof of funds, and the deposit of earnest money, and, of course, the purchase contract to be signed.
As mentioned above, you might wait as long as two or three months for the seller to respond with a decision or a counter-offer. Plus, banks have to carefully weigh their decision on a short sale since they have a lot at stake in the process. After all, they risk losing quite a bit of money and will carefully scrutinize the seller’s financial situation and the buyer’s purchase offer. Finally, the VA will back the loan only if it’s demonstrated that the home is in adequate condition and carries insurable value.
Common Mistakes When Buying a Short Sale Home
Be sure that you don’t make these common mistakes when going into a VA loan short sale. It is crucial to pay attention to the inspection to see what kinds of problems might exist with the short sale home. Remember, the VA will not back a loan on a short sale if the property does not meet “livable” standards. Paying attention to the inspection report will give you an accurate picture of the integrity of your new home so that you know what to expect if it comes into your possession, what kinds of repairs and remodeling projects you might have to take on. Are there any rodent or pest infestations? Are there health hazards like mold, lead, or asbestos? What is the condition of the home’s basic structure, like the state of the roof?
We suggest looking at this article of common mistakes first-time homebuyers make, a list of considerations you will want to have in mind when purchasing a house.
SoCal VA Homes Can Help With Short Sales
If you want to find short sale homes and want things to go as smoothly as possible, contact SoCal VA Homes! Short sales can be tricky, so you want to make sure you have an experienced broker. We are different from other lenders and real estate brokers, and you won’t regret working with us! Veterans frequently face a unique set of hurdles when trying to use their VA home loan benefits, whether it’s a VA home loan short sale process or a more traditional home purchase. We understand this, and we can help. Call us today at (949) 268-7742!