by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Many veterans in California purchase properties which are classified as condominiums. Some are large complexes, with professional HOA management, some are small complexes (under 6 units) with no monthly HOA fee and an informal cost-sharing agreement, and some are townhomes. All share on thing in common–they are listed on the county records as a condominium. This, the VA loan can not be funded until the condominium complex is approved.
The Southern California market has shifted, seemingly overnight from a buyer’s market to a seller’s market. Many listing agents are presenting multiple offers to sellers. Sadly, sellers leave some money on the table because the best offer is one using a VA home loan. The sellers believe that the VA home loan can not be used because the condominium complex does not have a VA approval.
Buyer’s agents jobs then, are to present the VA offer with an eye towards minimizing the risk associated with it.
First, the buyer’s agent would do well to present documentation which demonstrates that the veteran is a strong buyer. Some successful agents go so far to present my automated underwriting findings along with asset and income documentation (with the veteran’s permission, of course). Demonstrating that the veteran has the credit, income, and asset requirements, to be approved for the loan amount, shows that the veteran is “bankable”.
Second, the buyer’s agent might address the three common concerns, sellers have with VA loans in the cover letter. The cover letter should highlight that the veteran earned the no-down payment loan as compensation for his or her service to our country. I sometimes call this “wrapping the offer in the flag” and the buyer’s agent should not be shy about doing it. If the veteran served overseas, highlight it. If the veteran earned a distinctive award, highlight it.
The buyer’s agent should be clear about whether the seller is being asked to pay for the VA non-allowable costs and specify the dollar amount. If the offer does not include seller-paid costs, the letter should state who is paying for those costs (usually the lender) and reference the section in the offer which states that. I generally recommend that agents use this language
“VA non-allowable costs to be paid by lender. Seller not required to pay any of the veteran’s non-allowable closing costs”
The buyer’s agent should discuss the condominium approval process in the cover letter, too. The lender’s name, email, and number should be included, along with 2-3 references who can confirm that the lender knows how to get the complex VA-approved. This point is important. The lender should be able to demonstrate proficiency in the complex approval complex and should state that the appraisal can be ordered before the complex is approved. Not all lenders will do this. Many lenders state that the complex has to be approved prior to ordering the appraisal–that just ain’t so. The loan can be processed, underwritten, and approved before the complex approval comes in. Ultimately, the lender should have a full approval with one condition remaining; the complex approval.
Finally, the buyer’s agent should confidently present the VA Amendatory Clause with the offer. The VA Amendatory Clause is nothing to hide. Sellers should understand that the appraisal will be performed conditioned upon the complex approval. Ultimately, that means that the veteran buyer’s deposit is refundable if the complex can’t be approved. If the buyer is bearing the cost of the attorney opinion letter, that should be disclosed as well–it shows that the veterans has “skin in the game” and a vested interest in a quick closing.
VA home loans are a great tool for buyers who have served our country. Sellers can get top-dollar for their properties if they address the “risks” a VA offer might present, have a game plan for how to mitigate those risks, and help the agents, veteran, and lender to close the loan quickly. Communication is key to a successful VA home loan transaction and that communication starts with a prepared buyer’s agent.
