I live and work in San Diego County, which is a big military town for the Navy, Marine Corps and Coast Guard.  Over the years I’ve had the opportunity to work with many active military and veteran buyers using a VA loan to purchase a home.  But lately, I’m struggling to help my VA buyers complete a purchase as they are facing what I see as a marketplace that discriminates against them.

Most of my VA buyers are young, first-time buyers who have steady income, but not necessarily much money saved for a down payment.  As a VA loan offers 100% financing, this would seem to be a perfect solution and a great opportunity.  However, here are the obstacles they face:

  • The price point for many of the young VA buyers in San Diego Countyis relatively low, so when bidding on a house they are often competing with cash buyers.
  • As the buyer is  not allowed to pay certain closing costs on a VA transaction, and most VA buyers need a considerable concession, the seller in this competitive market is more likely to select a buyer that doesn’t ask for closing costs.  Even if the VA buyer comes in with a  higher offer to allow the seller the same net profit, there is the risk  that the property won’t appraise at the higher value and the deal won’t go through.
  • The VA also requires a termite clearance, and the buyer is not allowed to pay for it.  So, this pretty much rules out every short sale as the seller is not going to pay for an inspection, repairs or clearance, and it is highly unlikely that the seller’s bank will pay.
  • The properties themselves often pose the biggest challenge in this market of REOs.  According to VA guidelines, the home      must be habitable with a working stove and heat source, floor coverings, no large holes in walls, or missing window trim or baseboards, no mold or  mildew, and plumbing that does not leak.       So buying a fixer is out of the question as the VA buyer is not  allowed to pay for any repairs.

I would like to think that sellers might choose to actually make an effort to sell to a member of our military, but I think the VA itself has made it unnecessarily difficult.  I understand the VA’s desire to reduce the financial burden for the military buyer, and make sure they are protected in the transaction, but from where I stand, I see that the rules that are meant to protect them are actually hurting their chances of successfully buying in this market.

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