Homebuyers and investors can purchase VA foreclosures at significant discounts. VA foreclosures refer to properties repossessed by banks, from current service members or veterans, who defaulted on their mortgage payments. The Department of Veterans Affairs (VA) guaranteed the loans. When lenders cannot sell these properties at foreclosures auctions and recover the loan amounts and foreclosures costs, they seek financial recourse from the Department of Veterans Affairs. The VA pays the lenders and receives title to foreclosed homes.
Advantages of Buying VA Foreclosures
Both veterans and non-veterans can qualify to purchase VA foreclosures. Similar to other foreclosed homes, VA foreclosures offer the opportunity to buy homes for personal residences or as investment properties. Foreclosed homebuyers can receive substantial savings on VA foreclosures. Discounts can amount to as much as 50 percent off the price of comparable properties. Qualified buyers can purchase these foreclosed homes with little or no down payment.
The rules do not require the buyer to purchase Private Mortgage Insurance (PMI) usually needed when buyers make a down payment of less than 20 percent for government-insured loans for financing homes.
Another plus to consider, the VA has a financing program for their VA foreclosures called the VA Vendee Financing program. Both veterans and non-veterans can apply. Owner-occupied and investment properties qualify for the program. VA also pays the closing costs for VA foreclosure buyers. This benefit could save foreclosure investors as much as six percent.
VA Foreclosures Buying Process
The purchasing process for VA foreclosed properties works similar to buying bank owned homes. The agency list VA foreclosures with real estate agents who enter them into the multiple listing service (MLS). Buyers of VA foreclosures make offers in the same manner as submitting offers for seller-owner homes. Foreclosed homes buyers must submit offers to the listing agent. All offers must include a $500 earnest money deposit. The VA sell VA foreclosures in “as is” condition and will not make repairs to foreclosed homes.
The VA has what it calls the Simultaneous Offer Period. Once the agency list VA foreclosures to sell, it handles all offers submitted for VA foreclosures as the buyers submitted the offer all together. If the VA determines that none of the bids satisfies minimum criteria, it continues to receive bids for the property. However, the VA treats subsequent offers for VA foreclosures on a first-come, first-serve basis.
Sometimes, the VA makes counter-offers on VA foreclosures in much the same way as a private seller does. The home buying process for VA foreclosures requires buyers to have patience when trying to get an offer approved because of the VA’s slow approval process.