In hot real estate markets, buyers using VA mortgages can have a hard time competing for homes
Troops and veterans sometimes are hurt by misconceptions about VA mortgages, or they encounter sellers who don't want their home to go through a VA appraisal.
A red-hot housing market during the pandemic has been great news for many sellers. Homes that used to sit on the market for weeks are gone in days or even hours. And the increased competition has raised prices, too.
But what’s good for sellers is bad for buyers, and the scramble can be especially hard for service members or veterans who want to buy a home with a mortgage backed by the U.S. Department of Veterans Affairs.
VA loans often don’t require a downpayment. They also don't require the private mortgage insurance that private lenders often demand when homebuyers put down less than 20 percent of the home’s value.
But experts say some real estate agents and loan officers don’t have much experience with VA loans, which has led to ongoing misconceptions.
Brandon Wooley is a Missouri mortgage broker who specializes in VA loans. He can rattle off a list of stereotypes: VA buyers are less qualified, they’re more likely to default, VA sales take longer to close, mandatory VA appraisals are overly burdensome.
All are false, according to Wooley.
But that doesn’t mean there aren’t differences between VA loans and other mortgages. One key distinction is that VA loans require a property appraisal that can be more stringent than traditional appraisals, especially if some parts of the house aren’t move-in ready.
Wooley said that often leads to confusion.
He describes a sale in the Kansas City area that almost fell through because the seller's agent thought a bathroom would fail the VA appraisal because it needed remodeling. But Wooley said all it took was a simple agreement to set aside about a thousand dollars for repairs, and the sale went through.
“That listing agent was told from another lender in the Kansas City area that it wouldn't go VA,” he said. “And they were not going to take that veteran’s offer.”
“If you don't have somebody working on your behalf that understands (the VA process), that can explain it and effectively close that loan for you, then, long live the myths,” he said.
Wooley said those myths are slowly starting to fade away. He said social media helps, because service members and veterans can trade stories about their successful VA loans and share resources such as contact information for real estate agents or lenders who know how to navigate the process.
It also depends where a home buyer wants to use a VA loan, he said. Towns near military bases are likely to be filled with real estate agents who understand the process.
Some of those agents are themselves former service members, such as Leslie Alford, who set up shop with her husband in Manhattan, Kansas after they retired from nearby Ft. Riley about 10 years ago.
Alford estimates about half her clients are current or former military. And she said Ft. Riley, along with Kansas State University, usually keeps the area’s real estate market pretty consistent.
But not this year, thanks to the pandemic.
“It was crazy this year,” she said. “A whole lot less houses for sale, a whole lot more competition for them, and higher prices.”
Alford said that in hot housing markets, VA buyers are also competing with people who offer all-cash for a house, which can be really enticing to a seller.
"You don't have to wait for an appraisal. You don't have to wait and hope that the bank makes a loan," she said. "Cash talks."
One of her clients, soldier Paul Wheeler, recently got orders to transfer to Ft. Riley from Louisiana. Wheeler and his wife worked with Alford to put together a list of about five houses, but it wasn’t long before that list got a bit shorter.
“We were literally walking through a house and we're like, ‘yeah, we like it,’” he said. “We'd have probably put an offer on it after seeing the other four and... it was already off [the market].”
The sellers accepted another offer before he and his wife even made it through the house. That wasn’t the only one.
“A couple of properties that the wife and I really liked and, you know, I say, ‘let's see it.’ Then, two hours later, it's already under bid. They denied our showing request. Because it just moves that quick.”
Alford said the pandemic has led to more virtual showings, which was an easy transition for her because she’s used to showing houses online to soldiers who know they’re moving to Ft. Riley but are still stationed overseas.
“I like to start in the front yard,” she said. “I’ve had people look funny at me because I’m out in the middle of the road with my cell phone talking to it, and walking down the road saying, ‘this is the neighborhood.’”
Despite missing out on a couple early options, the Wheelers did eventually get a bid accepted on a home.
“It's a nice four bedroom,” he said. “Three bathrooms... fenced-in yard, and it has a walk-out basement. So that hits 98% of what my wife and I were looking for.”
Compared to some of the horror stories out there, he said this process felt like a breeze. Now he just has to hope that selling their old house in Louisiana goes just as well.
This story was produced by the American Homefront Project, a public media collaboration that reports on American military life and veterans.Funding comes from the Corporation for Public Broadcasting.