How can I get buyer's nono VA offer accepted?

Asked by Ben Marion, Redlands, CA Sun Feb 26, 2012

I'm working with buyers who have been approved for a VA loan but have no cash to put into the deal. So far our nono offers have not been well received, Any ideas to help their offer look more attractive to sellers. We are in CA..

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Andrea Bedard’s answer
Andrea Bedard, Agent, Silver Spring, MD
Sun Feb 26, 2012
Hi Benm, I'm wondering whether or not your rejections are based on the 100% financing or on the fact that it is a VA loan. You still hear it all the time that sellers (and some listing agents) are hesitant to deal with a VA buyer because they heard that the appraisal/inspection is so much tougher and they fear having to fix more items.

I'm a military spouse and have had the pleasure of working with a few VA buyers. I've run into this misconception a few times. More than once it worked out because the seller was a Veteran himself. One time I ended up submitting a list of items that are not acceptable to the VA (such as peeling paint) and pointing out that non of these items are evident in the house so the VA appraisal should be a non-issue. The majority of my last VA appraisals have been uneventful and quick, too.

Although, the majority of my VA buyers do have some cash reserves, many opt for the 100% financing to keep some money in reserves and have some for improvements.

It would def. be in your buyers' best interest to at least have a small emergency fund set up. A little bit of savings will also look better in your offer even if they opt to finance 100%. They should also be able to come up with an earnest money deposit that is customary in your area. Hopefully they'll get it back at closing but it's just another factor that will make their offer stronger.

I hope this helps! Good luck and best wishes.
2 votes
Kathleen Hel…, Agent, Framingham, MA
Sun Feb 26, 2012
Good luck to your client. It is a very difficult concept to convey to a home seller that there is no money at risk on the part of the buyer. While my initial response would be the same as our fellow agent below - offer more than the asking price, sometimes that can backfire with an appraisal. Perhaps finding a seller who has been on the market for such a long time that they are willing to risk the offer perhaps with a kick out clause. I would also suggest to your client that they put together at least $500-$1,000 for a deposit that would be returned at the closing table. This good faith money might help the transaction - best wishes to a Veteran who is entitled to this type of financing.
2 votes
Danielle O'B…, Agent, West Roxbury, MA
Mon Feb 27, 2012
I do not agree that this is the reason homeowners are facing foreclosure, as stated below. Steve is right, it was an issue of overextending credit. Don't deny those who fought for our freedom their right to an amazing product.

I mainly work with veterans/VA buyers, but in Boston. It really depends on the market. Obviously, I cannot speak for California. I will say that my offers are generally well received by other agents, and therefore sellers, because as part of my offer process I educate them on what a VA loan is, what they can expect to be different, and my experience in closing VA deals, etc. I also tend to have my clients write a letter about who they are, and include their military background. And possibly create an emotional attachment... present in person where possible!

When you say no cash... do you literally mean $0 or just a small % down? Many of my deals have closed with a $500 deposit and no money at P&S. However, YES... the seller is taking a risk. Is your client able to increase their deposits slightly even if the money is returned at closing or put towards closing costs? Maybe explaining to your client why this is risky to the seller will help them see that to strengthen their offer they may need to put some extra dollars into escrow?

Lastly, before submitting the offer - play up the other strengths. Does your client have another home to sell? What is their timeline, is it flexible? Who did the pre-approval - someone you work closely with that you know has FULLY qualified them for the loan? I suggest you find a loan officer that will work with you in the offer process. Often, I have the seller or their agent call over to the bank to ask any questions surrounding the VA loan. If a seller knows there is a team of people committed to making this happen that helps as well.

Good luck!
1 vote
, ,
Mon Feb 27, 2012
I think the challenge is just having the seller/realtor understand what the VA loan is. This is a great product for Veterans. I put verterans into homes all the time on this product with loittle or zero cash. Have the mortgage consultant talk to list agent - I do this sometimes also print up articles on line about the product and share them with the seller.

And to reply to Ron Thomas below. VA loans have a much lower foreclosure rate then FHA and conventiopnal loan which require down payments. the biggest problem with people defaulting on their home loans isnt 100% financing at all. Its that we didnt verify their income and used stated income loans thus they qualified for more then they could afford.

The VA loan hasd no monthly PMI and also has a great 30 yr fixed rate at 3.75% with no closing costs currently!
1 vote
Heidi Zizza, Agent, Framingham, MA
Tue Feb 28, 2012
A strong bank letter and a strong sales price should do the trick
0 votes
Kevin Vitali, Agent, Tewksbury, MA
Mon Feb 27, 2012
Make sure you have one great pre-approval. Unfortunately your buyers will always be at a disadvantage with no money down when it comes to competing offers. The problem with no money down is there is absolutely no room for error.

As well as a great pre-approval, talk to your client about making the mortgage broker available to answer questions from listing agents.
0 votes
, ,
Mon Feb 27, 2012
Did your client get pre-approved based on credit alone, the loan officer didn’t review the support docs? If that is what happened, and unfortunately it is a common practice, then the pre-approval letter requires a lot of items which looks bad to a seller. If the pre-approval letter implies the LO hasn’t reviewed anything I don’t blame the seller, and it wouldn’t matter if it was a VA, FHA or conventional, it should make them nervous. Also, vets will often use a lender out of state, this can be viewed as a negative to a seller. They cannot reach the LO that signed the pre-approval letter. If this is what is going on, have your client apply with the local LO you trust the most.

The price isn’t the only factor but as you can see from the previous comments it can be important. One obstacle could be the sellers think the buyer’s lender is going to charge the seller a bunch of junk fees, so they just reject the offer without investigating. Package your next offer better and tell your client to use the lender you trust, if you don’t trust them neither will the seller.
0 votes
Ron Thomas, Agent, Fresno, CA
Sun Feb 26, 2012
This is exactly the type of thing that got a lot of Homeowners into Foreclosure:

If you are able to put this together; are you really doing them any favors?
0 votes
Tim Moore, Agent, Kitty Hawk, NC
Sun Feb 26, 2012
Offer more money......................
0 votes
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