VA Loan Seller Requirements: Pros and Cons

Lingering myths and misconceptions about these loans and their performance in the market push some sellers to reject VA offers entirely.

That isn't just a disservice to the Veterans and military families who've earned this benefit through service to our country. Plenty of sellers and real estate agents are turning their backs on the best-qualified buyers on the market.

VA Loan Requirements For Sellers

Sellers should be aware of the following if selling to VA loan borrowers:

• The property must pass the VA appraisal and meet Minimum Property Requirements
• There are non-allowable fees a buyer may ask a seller to pay for
• VA guidelines allow sellers to pay up to 4% of selling price in concessions
• VA loans have a Funding Fee that buyers typically pay but could fall on the seller with negotiation

Let's take a closer look at some of the pros and cons of VA loans for sellers and why you should consider offers from VA buyers.

Pros of Selling to a VA Loan Buyer

Higher Closing Success Rate

VA buyers are more likely to get to closing day, at least on average, than any other buyer on the market.

Part of accepting offers is feeling good that the buyer has what it takes to close on the loan. Preapproved VA buyers are as strong a buyer as you can find in the current lending climate.

There are other considerations worth thinking about, from purchase price and closing costs to how long it'll take to close. But at the end of the day, home sellers want offers from buyers who can get to closing day without hiccups.

VA Loan Turn Times

There's a long-held misconception among some real estate agents that VA loans are littered with red tape and bureaucracy and take forever to close. The VA loan program has invested heavily in technology over the last decade, which has helped ensure VA loans keep pace with other loan products.

To be sure, every buyer's situation is different. But on average, there isn't a huge delay in time-to-close between VA and conventional loans.

Over the last two years, the average conventional purchase loan closed just three days faster than the average VA purchase loan, according to Ellie Mae.

Looser Underwriting Criteria

A big perk for buyers and sellers with VA loans is the relaxed underwriting process. Most Veterans will go through an Automated Underwriting System (AUS), which is fairly quick. Generally speaking, VA loans also come with looser credit score requirements and higher debt-to-income ratios, meaning you’re less likely to run into issues with your borrower’s income or credit history.

Because the underwriting process is less stringent than conventional loans, sellers can have peace of mind that underwriting should not hold up the process.

Cons of Selling to a VA Loan Buyer

VA Appraisals

The VA appraisal process is two-pronged and involves both the valuation and a broad assessment of certain property conditions, known as the Minimum Property Requirements, or MPRs. During normal times, VA appraisals typically come back in just under 10 days nationwide, although the wait may be longer in more remote parts of the country.

There are also a lot of myths and misunderstandings surrounding VA appraisals. For sellers, your home doesn't have to be in perfect condition to pass the appraisal. If the appraiser does flag property condition issues, buyers may be able to obtain an exemption from the VA. If an exemption isn't granted, then the seller isn't required to pay for the repair -- it's possible for the buyer to do so in order to keep the deal moving forward.

VA Closing Costs

Some home sellers won't accept VA offers because they mistakenly believe they'll have to pay all of the buyer's closing costs.

The VA does limit what closing costs Veterans can pay, which is a huge benefit for those who've served our country. But sellers are not required to pay any closing costs on behalf of a VA buyer, including non-allowable fees Veterans aren’t legally permitted to pay.

Who pays what in closing costs is always a matter of negotiation between buyers and sellers. There is no requirement that a seller pay a dime toward a VA buyer's bottom line.

May Not Meet the Buyer

It’s not uncommon for Veteran homebuyers to be deployed while in the middle of their home buying journey. In this case, Veterans may invoke a power of attorney (POA) to handle the closing of their home.