RELATOR ® and Seller Misconceptions about VA Loans
Many sellers who reject an offer contingent on VA financing do so because they operate under several false misconceptions, often provided by the listing agent.
Many sellers who reject an offer contingent on VA financing do so because they operate under several false misconceptions, often provided by the listing agent. For example:
MYTH: They believe it will cost them more money because of VA rules on fees the buyer can pay.
FACT: They assume there are fees that will automatically be transferred to the seller—fees that other loan programs would not require the seller to pay. The reality is that the buyer is often allowed to cover all the fees being charged, and if they can't, then someone like the lender or agent can cover any non-allowable fees.
MYTH: Some believe that because VA loans are 100% financing, the buyer or the loan program must be shaky.
FACT: In reality, the VA home loan program, due to common sense underwriting and residual income requirements, often has the lowest or second lowest default rate of any program in the country
MYTH: Others believe that it takes longer to close a VA loan.
FACT: It takes an experienced mortgage loan originator no longer to close a VA loan than a conventional loan program, even though there is more paperwork involved.
MYTH: They believe the appraisal will come in low, have crazy repairs, and require they do an abnormal amount of work to bring the property up to VA standards.
FACT: VA appraisers must do more work if the value is low, and the VA's minimum property requirements are very reasonable items any buyer would want corrected. Ironically, the VA appraisal system now has more accountability than the Conventional system.
"Tidewater" & low Appraisals
If the value is likely below the purchase price, VA has added a step to verify the appraisal is as accurate as possible. The extra step allows the agents to provide additional information before the appraisal is finalized.If the appraiser believes the appraisal value will be lower than the sales price, then the appraiser issues what is called the "Tidewater" Initiative. It is named "Tidewater" after a conference in Tidewater, Virginia, where the VA created this process.The first step is for the appraiser to notify the person who ordered the appraisal, "LENDER," that Tidewater is being triggered. At this point, a client does not typically have any information about the appraisal; it might come at a low price.The next step is to contact the agents (both sides) and request any additional information to support the value. The agents have two business days to provide that information.
The information provided is supposed to be in a grid format (like how an appraisal looks), along with a narrative. Most agents do not know a grid format or how to use one, so they just submit hyperlinks to properties. Translating the agent's input into a grid format, especially if someone can provide a 'matched pair' analysis, will significantly help make the case.
The appraiser needs to review all the information provided and comment on it in their report. That comment might be simple, like "comps provided by the agent were six miles away and inferior to comps used." Therefore, reviewing the comps provided by the agents and discussing options with them is important. Unlike conventional or FHA appraisals, this means the agents get to provide that information while the appraiser is still working on the appraisal and has not finalized the report.
Mindful Money is a lending provider servicing Arizona, California, and Colorado with mortgages of all kinds. Whether it is an initial purchase or a refinance, we help buyers secure a loan to finance the home of their dreams.
