If you are interested in investing in VA foreclosures, you are looking at a foreclosure sector full of potential. VA repossessions occur when homes that used to have loans guaranteed by the U.S. Department of Veterans Affairs (VA) are foreclosed. Real estate investors will find all kinds of homes to choose from – from single family houses to duplexes, triplexes, not to mention condominiums and townhouses. And best of all, you don’t have to be a veteran to buy VA foreclosures or assume a VA home loan, although many lenders are becoming more stringent in their criteria for permitting the assumption of VA loans. Real estate investors interested in buying VA foreclosures must understand the details and the “fine print” that come with buying from the VA in order to make the most of these opportunities.
Created in 1944, the Department of Veterans Administration – which was succeeded in 1989 by the Department of Veterans Affairs – was established for the purpose of helping men and women who have served in the armed forces with various benefits. The VA provides a wide range of federal benefits to veterans and their dependents, including health care, financial assistance, burial assistance and home loan assistance.
Under the VA home loan program, qualified borrowers – usually veterans and sometimes spouses – can purchase a home with no money down. VA home loan requirements are fairly liberal when compared with other loan programs. For example, under many conventional loan programs, personal bankruptcies within five years of applying for a loan would disqualify the applicant. Under the VA program, however, veterans with bad credit or bankruptcies could get a VA home loan. Veterans can also reuse their VA loan eligibility repeatedly, making another purchase after a property is paid off, sold, or even if it goes into foreclosure (with some stipulations).
H2 Other Benefits Offered To Veterans Under The VA Home Loan Program Include:
Lenders like to work with the VA because they provide lending institutions with a guarantee that loans made to veterans will be repaid in full in the event of default by a veteran borrower.
The VA awards contracts to preferred vendors to manage the listing, marketing, and sale of VA foreclosure properties. However, in order to make the sale of these homes as profitable and productive as possible, the VA permits the MLS and some other listing services to provide information on these homes as well. Any real estate broker can show an investor interested in investing in VA foreclosures properties on that list, and you can usually find these properties on credible foreclosure listings database sites like RealtyTrac as well.
Many investors think that VA foreclosure properties will be sold at a deep discount because they are likely to be highly leveraged or in poor condition. That might have been true in the past, but today, the VA tends to ask (and get) market value on its foreclosure properties. This is because of the practice of pricing the home at market value exactly and then dropping the price every 90 or 180 days instead of negotiating with buyers in the interim. The results speak for themselves; although VA foreclosures often have at least one price drop on record, they tend to sell for a median price of whatever the VA asked for them at the time of sale.
It is important for buyers investing in VA foreclosures to also remember that the VA does not usually pay closing costs unless those costs are included in the sales price or unless the buyer is using a VA direct or VA-backed loan to purchase the property. The investor will generally pay lender fees, title fees, and for any surveys and appraisals unless those fees are included in the contract and in the purchase price.
It can be tempting to assume that since the VA is not necessarily going to negotiate with you on price that you do not need additional inspections or appraisals on your VA foreclosure property. However, this is a dangerous decision to make. Because you are unlikely to create any “wiggle room” during the negotiation process, it is important to factor in every potential cost that you could incur while doing the deal. If you do not have an updated inspection or appraisal, it could be difficult to predict your end results.
After your inspection, you’ll need to have your realtor or the listing broker prepare the offer and complete all the necessary documentation. The bid must be submitted on a special VA contract form, and your broker must be registered with the VA to submit offers. Most people with experience investing in VA foreclosures recommend attaching an earnest money deposit and, with the exception of using any specialized paperwork, treating the process of making an offer on a VA foreclosure the same way you would in any other traditional home sale.
Once the VA accepts your purchase offer, you have only seven days in which to have a home inspection completed. In most cases, the VA will not make any repairs prior to the sale.
Sign Up Now! and take full advantage of RealtyTrac’s FREE Trial, which allows you to search our foreclosure inventory free for 7 days. The perfect foreclosure property could be waiting for you right around the corner!