The Most Challenging Financing in Sacramento Real Estate

November 19, 2008

The VA Loan

VA loans are excellent for the buyers of residential property.  They afford the buyer much more latitude in down payment, lower interest rates and paperwork.  There is one side of it that can take some time, obtaining the certificate of eligibility, but for most qualified borrowers, they are great.

The problem with VA loans is that they require a few things of sellers accepting these offers:

1.  Clear the home of current pest damage.

2.  Pay the lender fees that the buyers aren’t allowed to pay.

3.  Homes must “pass” a the VA appraisal process.

Pest Damage

The VA requires that the damage created by wood destroying organisms, termites, wood beetles, dry rot, etc. be repaired.  This is a great protective measure for the buyer.  This is a problem for the majority of homes in the Sacramento real estate.  The majority of listings on the market are either bank owned or bank negotiated.  Depending on the price range and neighborhood, 85% to 95% of the listings on the market are bank owned or bank negotiated short sales.  In listing description after listing description, the notation is “seller will make no repairs, home is sold “as-is”.  The VA buyer doesn’t have an option on these homes.

This eliminates the majority of homes in Sacramento from consideration for the VA borrower.

Credit Backs

The VA doesn’t allow the buyer to pay certain lender costs.  These costs are passed along to the seller to pay out the proceeds of the sale.  This isn’t as big a hurdle as requiring that the pest work be completed, the buyer must realize, however, that this affects the net proceeds for the seller.  With competition for homes in Sacramento, buyers with VA loans, depending on how long the property has been on the market, are well advised to offer more than the listed price to help the seller make up these costs and so that their offer will be considered.

The VA Appraisal Process

The basic process with a VA appraisal is that the appraiser is sent out to the home to inspect it not just appraise the value based on general condition.  The VA appraiser is to inspect the property much more thoroughly than a regular, conventionally financed loan.  They will assess the condition of the home and if the appraiser feels that the home is in good condition AND appraises for the purchase price, they will issues a CRV or Certificate of Reasonable Value.

VA  appraisers scrutinize the home they are appraising.  They are VA approved and sent out by the VA.  This causes the process to be delayed in comparison to a regular conventionally financed loan.  VA appraisers have killed otherwise successful home purchases by conditions imposed on the seller.

Simply Said…

With the real estate market the way it is in Sacramento right now, VA borrowers have very little to choose from and will need to offer more than the price the property is listed at to have a chance on the homes that will clear the VA process.  In most cases, they will need to focus on homes not owned or negotiated by banks.  In Sacramento right now, not many homes fit this description depending on the neighborhood and price range.

VA is a great way to go for the borrower if the borrower can get their offers accepted and close on a home.  While not impossible, this is very difficult right now.

Like what you’re reading?  Why not Subscribe?

Comments

• Subscribe