With the Iraq War coming to a quiet end in 2011, tens of thousands of U.S. troops have returned home—but what home are they returning to? With the rise in veterans needing residences, there stands to also be a rise in the popularity of VA loans, providing an important niche market for real estate professionals to slip seamlessly into—if they are prepared.
A VA loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs (VA), and helps eligible veterans purchase properties by supplying them with home financing.
When working with clients using VA loans, there are many things that agents and brokers need to be aware of, according to First Team Real Estate agent Linda Garner, a VA loan specialist in southern California for the past four years. With a background in international business, Garner happens to come from a military family—which is why she is passionate about helping our soldiers.
“Due to the process behind obtaining a VA loan and finding and purchasing a suitable property, working with VA-loan clients is different than the typical real estate transaction,” Garner notes.
VA Loans vs. Conventional Loans
So how does a VA loan differ from a conventional loan? Today, most banks ask for a 10 – 20 percent downpayment on a conventional loan. However, a VA loan is backed by the federal government, making it one of the only loans that requires no downpayment.
Additionally, banks do not require private mortgage insurance on VA loans, so monthly payments are significantly lower. On top of that, the qualification standards for a VA loan are very different. As they are government backed, the bank assumes less of a risk and so—as long as military status is verified—the loans are easier to obtain.
Working with VA Clients
“It used to be that buyers weren’t allowed to cover certain fees, leaving the seller to take care of more financial strain,” explains Garner, adding that this made it difficult to find a seller who would accept a VA loan. However, those guidelines were removed last year, so VA-loan holders are having an easier time finding sellers. “Now, those fees are locked up in the closing-cost process, so the buyer handles it, but it’s paid by the government,” Garner states.
The process for purchasing a home with a VA loan is different, and a home purchased by a VA-loan holder has to meet specific guidelines.
“Once the property is in escrow, the VA appraiser is sent to the property to appraise the property value and condition,” explains Garner. “If the property appraises for less than the agreed price, I go back to the seller to renegotiate.”
The appraiser will make note of items that need repair, and the seller is asked to take care of it. If they do not, the agent either requests that the seller credits those repairs, or the buyer is required to make the repairs prior to closing. A few days before closing, the appraiser will go back to the property to ensure that all repairs have been made before the offer is signed.
Garner has a great deal of experience helping buyers find homes that meet VA-loan standards. Below are her guidelines for singling out a property that will meet VA standards.
Guidelines for Identifying a VA Standard Property• No fixer-uppers—property must be in good condition
• No exposed wiring
• Plumbing in working order
• Kitchen must be intact, although appliances are not necessary
• Floor must be covered—no exposed cement foundation
• Bathrooms must be intact—no missing toilets, sinks or tubs
• No broken windows
• Swimming pools must be clean and operational
• No foundation issues
• Roof must be in good condition
• No chipped or peeling paint on the outside or under eaves
• Must have operational water heater and heating system
• Air conditioning not required, but must be operational if present
• HOA property can only have the minimum of 15 percent HOA dues delinquency and must be located in a VA-approved community.
• Seller must provide a clear termite report. If there is any termite damage, it is the buyer’s responsibility to make those repairs before closing.
Garner finds the majority of her clients through referrals from past VA clients and markets herself directly to veterans in her community and surrounding areas.
She notes that her partnership with lender Cary Pearce from Provident Bank is invaluable. The pair has an impressive 100-percent closing rate with their VA.
“We work well together as a team and we have earned the trust of our clients. We strategize a plan with our clients for each property they are interested in purchasing,” explains Garner, who discusses all possible property challenges with Pearce before they occur.
While Garner has helped many memorable VA clients find homes in the past several years, she had a particularly special closing with client Xavier Lopez, an active military member. Lopez—along with the help of Garner and Pearce—purchased a house in Pamona, Calif., while he was stationed in Iraq.
“I came home for 14 days for Christmas,” says Lopez, who met Garner several years earlier and kept in contact with her while he worked on improving his credit. “I made plans with Linda to look at houses while I was home. I saw the house one day and went back to Iraq the next.”
Lopez made an offer on the house and over the next several weeks, Garner and Pearce worked to get his documents signed and notarized with the help of a military Judge Advocate General (JAG)—a lawyer working simultaneously as a military officer and a practicing attorney.
“Owning a home was at the top of my life-list,” says Lopez, who has already put in over 20 years of military service. Lopez was able to move into his home a week after returning from service in March 2011.
“There’s a level of respect for others that I think has been lost over the years,” says Garner, on the benefits of working with military clients. “I find that my military clients still hold that respect and high regard, which they get from their military training, and I gravitate toward that. They are so grateful. And I have such high regard for them and what they’ve done for our country.”
Armed with the right knowledge, agents can expect to do well working with VA-loan holders as they purchase properties in 2012 and beyond.
Garner’s Top Tips for Agents Working with VA-Loan Clients
• Learn the VA process and the guidelines.
• Find a lender to partner with who knows the process inside and out. When you have a lender who can offer no fees to the seller, you’re in a positive negotiating position.
• Be sure you can close in 28 days or less.
• Be patient. Take your time in finding the right house.
• Do your homework. Only show homes if you know the seller is willing to accept a VA loan.
• If you find a home and the seller doesn’t want to accept a VA loan, try to sell the positive aspects in a written narrative in your offer.
• Make your offer stand out by talking about your client’s service and really sell your client to the seller on a personal level. The negotiator or the seller will know you mean business and will want to do business with you.