Buying a Foreclosure With a VA Loan
A foreclosure property can be a great opportunity to buy a home at a discount because the previous owner was no longer able to afford their mortgage payments. Buying a foreclosure with a VA loan is permitted by the Veterans Administration as long as it meets VA loan guidelines for property type and condition. We have helped many buyers like you buy a foreclosure with a VA loan. However, there is some valuable knowledge we feel that you could benefit from, knowledge that we have acquired through our years of experience. Having this knowledge will help you be more educated about buying a foreclosure with a VA loan; saving you time and money.
Whether you find the foreclosed property on your own or through a real estate agent, make sure you gather as much information about the property as possible beforehand. It is important to know the condition of the property and how the listing price compares to other homes in the area in similar condition. Lenders of a foreclosed property have already completed an evaluation of the home’s condition and value relative to comparable homes. We have also seen real estate agents list a home for sale at a very aggressive price in order to generate more buyer interest in a property. A low listing price will often generate more offers on a home to drive up the sales price.
Before making an offer when buying a foreclosure with a VA loan, it is important to know that once an offer is submitted, it may take from a few days to a few weeks to have the offer accepted by the seller. The offer has to be approved by the seller, but the approval may need to go through several individuals or even before a board for review and approval. Depending on how long the property has been for sale, the seller may require updated feedback from the listing agent or an independent third-party to determine the current condition and value of the property. This process to evaluate the home can take up to a few weeks to complete. If the seller decides to complete a new evaluation of the property
Making an Offer When Buying a Foreclosure with a VA Loan
If you decide that buying a foreclosure with a VA loan is right for you, it is normal to have some contingencies with your offer. Although it is best to have as few contingencies attached to your offer as possible, we have seen buyers receive thousands of dollars paid by the seller towards closing costs and necessary repairs. Making your offer contingent on selling an existing home or not being flexible on a closing date (too soon or too far out) may cause your offer to be denied by the seller. If the home is in good condition, a desirable area or multiple offers are expected from buyers because of an aggressive sales price by the listing agent, be prepared to offer more than the list price.
The seller will most likely impose strict deadlines for financing, due diligence, completion of inspections and closing. These deadlines, especially closing, are very firm, regardless of the buyer’s circumstances or findings during inspections. The lender wants to unload the property as quickly as possible since money has already been lost with foreclosure of the property and there are ongoing expenses associated with the property.
Once your offer is accepted by the seller, it is imperative that all of the contract deadlines are met and the necessary appraisal, inspections and any repairs are completed on time. If you are buying a foreclosure with a VA loan in an area you are not familiar with, your real estate agent generally will have established relationships with reputable companies who can perform required inspections and repairs if needed.
Working with a loan officer that has experience helping National Guard members and veterans who are buying a foreclosure with a VA loan will ensure that you meet financing, appraisal and closing deadlines according to the sales contract.
Inspections & VA Appraisal
A foreclosed home has usually sat vacant for months or even years before being put on the market to be sold. The previous homeowner may have neglected regular maintenance and in many cases has purposely damaged the property. We always advise borrowers to get a home inspection from a qualified home inspector for any home they are seriously considering buying. Having a home inspection done will assist with determining the condition of the home and if repairs are minimal or substantial.
In addition to a home inspection, you may be required to complete a pest, sewer or well inspection per Veterans Administration guidelines. Each of these must be performed by a licensed professional and can add hundreds of dollars in costs before any needed repairs are ever completed. An appraisal by a VA-approved appraiser will be required to determine the home’s value and to ensure that the home meets the Veterans Administration’s cosmetic and safety requirements. Foreclosure homes with physical or cosmetic damage will have to be repaired prior to a final appraisal inspection report being issued by the appraiser. If repairs are required, a re-inspection of the property must be completed by the appraiser at a cost to the buyer.
If repairs to the home are required, repairs must be completed by a licensed professional and the buyer may be required to pay the costs out of pocket. Repairs can range from simple cosmetic fixes to major repairs like termite or structural damage costing thousands of dollars.
Although buying a foreclosed home may require some additional steps or time it is still an opportunity to get a great deal on a home. It is also important to work with the right loan officer to help you find the right professionals, coordinate and complete inspections that could save you thousands of dollars and help you avoid stress when buying a foreclosure with a VA loan.
Photo Credit – “Signs Of The Times – Foreclosure,” Jeff Turner, Flickr.com
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