Not All Offers are Created Equal

The real estate market over the last two years has been the hottest we have historically ever seen. With that has come a wild variety of buyer offers, buyers outbidding one another, waiving contingencies on appraisals and home inspections, and even overbidding well above the market value just to get in a property. For sellers it seems like everything beyond the highest offered price is unimportant, but nothing could be further from the truth. While there are many stereotypes about conventional loans, FHA loans, VA loans, there are differences that when considered communicate the strength and value of the overall offer beyond just the highest priced offer. Today we’re going to look at some of the commonly overlooked factors that listing agents and sellers need to consider when they are reviewing numerous buyers offers at the same time.

Financing Type: On the surface the highest priced offer might look like the best offer to accept when it comes to selling your home at the top of any market. Now the challenge becomes what type of financing does the buyer need. Just because someone comes to the table with a conventional offer and 20% down does not necessarily mean that they are the strongest offer of the batch. A common stereotype about VA loans is that the borrower has no money to put down, or they are unable to qualify for a conventional loan and the VA loan is their fall back option. Nothing could be further from the truth. Even when you cross the $1,000,000 loan amount and purchase price, the VA home loan still remains a more competitive interest rate option for buyers compared to conventional financing with 20% down.

Closing Conditions: Next we have to look at the conditions and requirements of a VA appraisal and the home inspection. It is commonly known that VA requirements can be more stringent in some ways, but they are not always more stringent.  Additionally, appraisal and inspection standards that do not mean that the house cannot be properly appraised at value, and that also does not mean that the VA buyer is unable to cover the difference between the appraised price and the offered price on your purchase contract. Oftentimes veterans we work with are very fiscally responsible, have strong spending habits, keep accurate monthly budgets, and a possess a vast financial planning knowledge base. Specifically, veterans who make offers on a home do so within the context of not only the monthly payment, but also how they choose to use their assets as part of the transaction or not. Because the VA home loan benefit allows for a veteran or active-duty service member to put zero percent down and still receive the same interest rate for a VA loan that they would if they were to put 10% or 20% down, commonly we see they choose to keep their cash in hand and maximize their VA 100% financing zero down payment benefit at time of purchase.

Speed to close: A very unfortunate myth about the VA home loan is that they take a very long time to fund and close. That could be no further from the truth these days. With advancements in technology, underwriting, and vast VA financing lending channels available, the VA home loan now closes regularly just as fast as any other loan type. Where most listing agents have a stereotypical problem with the loan closing speed, is rooted in the VA appraiser’s timeframe of 10 business days to conduct their appraisal report. Of all aspects of funding a VA purchase, the appraiser’s turnaround time is the core catalyst to any VA loan closing taking longer than 14 days. Therefore, any time frame sooner than 30 days but longer than 14 days is a realistic time frame for which you should expect your VA purchase loan to fund and close.

Loan Officer Specialization: Another misfortune when making offers on properties these days, is the difficulty of the listing agent access to loan officer specialization on the buyer side of the deal. For example, let’s say your offer is being made with a VA buyer who is using a loan officer and that loan officer specialization is conventional or FHA financing. Well, if that loan officer only does a few VA loans during the year, they are way less likely to be intimately familiar with all the nuances that change on a daily weekly and monthly basis with that loan program, turn times, and industry required conditions to fund VA loans. This speaks volumes to the specialization of VA experts in your local area who focus their entire business on helping active-duty military and veterans purchase and refinance residential real estate. If a seller has only two offers to select from and they both require financing, Offer A is a conventional offer with a brand-new loan officer, but Offer B is a VA offer at the same price with the same closing timeframe, but backed by a financing team with more than 16 years of business and thousands of loans closed. The likelihood of having a smooth transaction exists with the offer connected to the loan officer with VA specialization and a proven track record of closing VA purchase loans.

Saying that all offers are not created equal is kind of easy at face value. But when it really comes down to it the nuances that separate one deal being stronger than all the others comes down to a variety of factors which need to be considered by sellers, and their listing agent. One thing that we know for sure with this many years in business is – EXPERIENCE MATTERS. Specialization matters. Understanding how to work with all parties involved fluidly during an escrow process matters. So, when it comes to reviewing offers and comparing numerous offers on a real estate residential sale, please be sure to consider all factors and variables that are attached to the ability to close your transaction successfully and seamlessly on time, for top dollar, and with as few headaches as possible.

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Rates & Fees Disclosure:
^‡ The payment on a $300,000 30-year fixed-rate VA loan at 3.000% with a 80% loan-to-value ratio is $1,292.01 with 0 (zero) origination points due at closing. The annual percentage rate (APR) is 3.235%. Payment does not include tax and insurance premium impounds. The actual payment amount will be greater. By refinancing your existing loan, the total finance charges may be higher over the life of the loan. Some state and county maximum loan amount restrictions may apply. Appraisal fee of $600, Processing Fee of $895, Underwriting Fee of $795 included in APR calculations with borrower paying 0 (zero) loan origination points.

^‡ Based on Mortgage Heroes internal data.