Selling Your Home to a Buyer with FHA or VA Financing
Article by Deb Staley
A popular home loan program with veterans is a VA loan and a common loan program for first-time homebuyers is an FHA loan. As a seller, with all things being equal, your best offer is from a cash buyer. With the high cost of housing now, those offers aren’t very common. The next best offer is from a buyer with a conventional mortgage loan. Selling your home to a buyer with an FHA or VA loan can be a fraught process. This is my own opinion based on my experiences as a Johnson County, Kansas real estate agent for many years.
First of all, buyers will pay to have a termite inspection and a home inspection. Some buyers will even pay extra for a radon test and perhaps to have a camera run through the sewer line. (It really adds up!)
The inspection process is the worst part of the real estate transaction. Some buyers will panic and back out of the sale. Other buyers will ask you to repair things that really aren’t fair or necessary. A few buyers understand that all homes come with a “honey-do” list and will be fine.
After getting through the inspection process, all buyers (with a mortgage) will have to pay their lender up front to have an appraisal done. The bank wants to make sure the home is worth what they are lending, of course. Usually this goes on without a hitch and you can kick back and wait for your closing and your big check.
With an FHA or VA loan, the appraisal adds another step, which is sort of another inspection! That appraiser may add a whole other list of items to be repaired like adding a stair rail, splash blocks, or even repainting sections of the home (no peeling paint is allowed.) Most sellers become unhappy about having to go through this, and who can blame them? The worst part is that there is no negotiating here; sellers must do what the appraiser says or kill the deal.
When I list a home for sale, I display “Cash” or “Conventional” in the multiple listing service (MLS) most of the time. This eliminates the extra headaches for my sellers. However, it may limit your number of potential buyers if your home is in a price range where this type of loan program is common. This is just one of the many things to think about when listing your home for sale. I will always give you a list of all homes that sold in your area in the past year (“comparables”) so that we can see what kinds of loan programs are typically used.