Selling home in WA State - potential buyer using VA loan
February 28, 2021 11:46 AM   Subscribe

My brother is selling his home in WA State (Kitsap County, if that matters). Home was listed last week at $362k. An offer has come in at $399k, with the buyer using a VA loan.

The offer said that my brother needs to accept or reject by 9pm tonight. However, the loan is contingent on an appraisal, which would be done this coming Tuesday (after tonight's deadline). I'm in CT and trying to help him maneuver through this, but am unfamiliar with VA loans.

A few other details, if this helps:
Brother has no money - literally $100 in the bank, so selling this house is critical and urgent. He is currently in loan forbearance until April 1.
He has never sold a home before, so this is very new and uncharted territory.

Why would the buyer offer over $30k over asking price? If Brother accepts the offer of $399k, and the appraiser comes in lower, is he contracted/obligated to complete the transaction at the lower price?
posted by sundrop to Home & Garden (15 answers total) 3 users marked this as a favorite
I can't offer much of an answer to your question, but I can say that homes in Kitsap Country regularly sell far over their asking price.
posted by 10ch at 12:02 PM on February 28, 2021 [4 favorites]

Why would the buyer offer over $30k over asking price?

Can’t answer on the loans portion of this, but right now in the west coast housing stocks are lower than they’ve ever been. People in my city are routinely seeing offers for 50k or more on asking prices to be competitive. My folks just sold their house and were offered almost $80k over asking. It’s just bananas out here right now.
posted by furnace.heart at 12:02 PM on February 28, 2021

Best answer: How much escrow is the buyer offering?

If Brother accepts the offer of $399k, and the appraiser comes in lower, is he contracted/obligated to complete the transaction at the lower price?

The contract says the price. The amount your brother will get is the price on the contract. If the buyer can't produce this money at the date of closing, that is their problem and not your brother's.

However, if the house appraises lower that may cause problems for the buyer. Why would a lender give the buyer $399K when the house is worth (just an example), $350K? Lots of deals fall apart because the numbers go funny and the buyer can't get a mortgage in time.

Check the contact carefully and make sure your brother is protected if something falls through. Escrow $ is the primary protection. The "exploding offer" is kind of a red flag, so I'd be a little wary here.

But if it's a hot market as others have said, they could be lowballing your brother and hoping he takes the deal before someone shows up with more.
posted by mookoz at 12:05 PM on February 28, 2021

We sold a starter home to a VA loan buyer. We had to agree between accepting the offer and closing to do a few things, such as guarantee the roof for a certain period and install handrails on all stairways outside the house. It was not onerous and allowed a buyer who otherwise might not have been able to afford the home to buy it, as it allows exceptionally low down payments. They still have to qualify for the loan, but that is not the seller's issue. If the buyer has secured the loan, I don't see a problem with accepting it.
posted by citygirl at 12:51 PM on February 28, 2021

Best answer: The buyers are coming on a little strong in the hopes of getting a steal before word gets out about the house. If your brother is okay with that price, he can come back with a little bit of hardball on his own: he'll accept the offer tonight if the buyer gives him, say, $10K absolutely non-refundable earnest money cash right now. That'll give your brother some breathing room should the deal fall through.
posted by seanmpuckett at 12:53 PM on February 28, 2021 [8 favorites]

We bought our first home MANY years ago with an FHA loan and the seller had to make certain improvements to meet FHA standards. I just checked with Google and this sample hit seems to suggest that it is similar, though not as bad as it used to be. Perhaps they are signaling that they want the home and realize you may need to make improvements for the VA (?).
posted by forthright at 12:56 PM on February 28, 2021

Best answer: These are all standard questions. Does he have a realtor walking him through all of this?

I'm wondering if they bid high because VA loans can sometimes be a little longer closing time. I know when I was using an FHA loan I was told I'd need to bid above other buyers.

If the house doesn't appraise then either the buyer can close the gap (e.g., if it appraises at $379k, then the buyer could pitch in an extra $20k) or the seller could lower the price. The fact that this is a contingency means that if that happens, the seller wouldn't have to sacrifice their good faith deposit.

All of this depends on the exact contract language and local practice, but this is what I've been told when I was on the buyer side.
posted by slidell at 1:01 PM on February 28, 2021 [1 favorite]

Honestly, I wouldn’t do business with anyone who felt this strong arming BS (“need an answer by 9pm tonight”) was okay.

Like, even if the interested party were the wonderful Dolly Parton and Betty White, I’d still be giving that move on their part serious side-eye
posted by blueberry at 1:03 PM on February 28, 2021

The problem I could potentially see is that VA and FHA require the property to be fixed or remediated before the transaction closes. Houses need to be move-in ready without major health or safety issues.

In a non-VA/FHA transaction something major (like "roof has 10% life left") or minor (like "missing handrails"), the buyer can agree to drop the price by the estimated amount to fix it and everyone understands it'll get fixed later by the buyer if they choose. Buyer takes the risk.

But suppose it's something like a worn-out roof or leaky foundation? In a VA situation the seller is on the hook to replace that roof at their expense and have it done by closing - the price can't be adjusted. Which could be a problem if your brother doesn't have the cash on hand to do that.

I'd check with your brother that the condition of the house matches the VA checklist.
posted by mookoz at 1:07 PM on February 28, 2021 [2 favorites]

No real estate whiz, but just in general negotiation stuff, the combo of exploding offer (= they can walk away) with bid over ask (= they want this more than that) is odd at face value, but would be reconciled if his asking price was low.

Is this FSBO by any chance? If he set the price himself that definitely increases the odds of missing the market.
posted by away for regrooving at 1:07 PM on February 28, 2021 [2 favorites]

Response by poster: This is such good information - thank you!

Update - he has a broker and he's taking the deal. Also, it's not a VA loan (not sure how I got confused about that). Now we just keep fingers crossed that the appraisal comes back at/over asking price.

Thank you, MeFites!
posted by sundrop at 1:45 PM on February 28, 2021 [1 favorite]

The 9 pm deadline doesn't mean anything. If your brother isn't ready to accept it the offer by then, the prospective buyer isn't going to suddenly lose interest.
posted by wryly at 2:11 PM on February 28, 2021 [2 favorites]

The Kitsap market is *very* hot, with the selling price on average around 13% higher than asking. So a bid 30k over asking on a 360k sounds about right, if not a bit low. Definitely in line with the market here.
posted by dbmcd at 4:30 PM on February 28, 2021

Best answer: I recently purchased a house, and it took over a year with multiple rejected offers. Each time it was stressful: putting in an offer, having to wait a week (and having all that time to fantasize about the house), and then finding out you didn't get it? That was heartbreaking.

The house we finally got, we put in an "exploding offer" good for 24 hours. Because I was done with the heartache waiting game. Luckily, they accepted our offer, and we got the transaction done in about 5 weeks.

I know your brother has already accepted, but wanted to chime in as someone who has placed an exploding offer - it's not necessarily a warning sign. Could just be a sign that the buyer is sick of waiting for rejection - might as well get it over with up front.

Also, congrats to your brother! Hope the deal closes!
posted by chuntered inelegantly from a sedentary position at 9:43 PM on February 28, 2021 [2 favorites]

Sounds like the question is wrapped up, but I just wanted to chime in regarding the offer deadline. We bought our house in Seattle a couple of years ago, and for one of the houses we bid on prior to getting our house, our realtor advised us to put a deadline on the offer. This was because we made a strong offer, but wanted them to accept it before the open house they had scheduled, instead of using it to drive up additional offers that came in. By having it expire, they weren’t allowed to use it to negotiate with other parties. As it turned out, the seller strung us along anyway (pretending the seller wasn’t available to sign the offer), and we suspect they (illegally) used our expired bid to sweeten the offer they received from their open house. It really stung at the time (never bidding on a flip again) but we ended up in a good house for us.
posted by bluloo at 7:24 PM on March 1, 2021

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