To quote Professor Pippington’s blog, “Whiskey, Tango, Foxtrot!” This emotional outburst was in response to a listing for which the description stated that no VA buyers would be considered. FHA buyers, on the other hand, were apparently cool.
I might be able to rationalize this, even if it does smack of being anti-American. With VA financing, there is a laundry list of “non-allowables” or, in English, fees which the buyer in a typical transaction would customarily pay yet in the case of VA are required of the seller. These are generally smaller fees with one exception — the buyer’s share of the escrow fee.
I saw something this morning which I don’t get, however, no matter how many cups of coffee I ply my slow-starting Friday morning brain with. (And you know I am off to a slow start, because I just ended that sentence with a preposition and was willing to let it ride.)
“VA may be ok at the right price and terms. Seller says no FHA.” Say what? Sounds like someone woke up on the wrong side of the government insured loan bed. Usually, this stuff is money driven, but in this case, it doesn’t add up. Sure, there is a list of “non-allowables” for FHA financing also, but the total of the buyer’s customary charges which are awarded to the seller’s side of the balance sheet in the case of FHA financing generally totals a couple of hundred dollars at most. VA financing actually costs the seller more.
Maybe it is the appraisal that this seller fears, but that doesn’t make any more sense. The appraisal processes for VA and FHA loans are very similar, and while all these appraisals involve a slightly higher degree of difficulty, they aren’t your grandmother’s government sponsored loan appraisals. The horror stories of yore are just that — stories. While the seller may get saddled with providing a new GFI outlet or three, the days of having to rebuild from the studs out to appease the VA or FHA lender are gone.
More to point, if a seller is willing to accept one, why wouldn’t he accept the less-costly cousin as well?
Whatever. So much doesn’t make sense these days. It’s like someone bopped us all with a silly stick. This same listing says, “Fax offers (don’t e-mail anything).” What about if I fill up the tank, drive across town, and present the offer in carbon triplicate? Would that be OK? Do you think if I sent the offer from my computer via a crazy, newfangled technology called the eFax, he could trace my offensive use of eco-friendly tools and disqualify my client?
Better not to take chances. And, I am guessing that electronic signatures are out of the question as well. We wouldn’t want to make this too easy.
TGIF.
ABOUT THE AUTHOR Kris Berg is Co-Owner and Designated Broker of San Diego Castles Realty. If not-so static web sites are your thing, go here at once where you will find loads of real estate information including homes for sale, market trends, floor plans and more. Kris's hobbies include fencing and spot welding. She likes kittens. 
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{ 8 comments… read them below or add one }
Previous low FHA appraisal – stuck with it for 6 months.
This input must be coming from their agents, who are just putting hurdles up to getting their listings sold.
“the buyer in a typical transaction would customarily pay yet in the case of VA are required of the seller”
Kris this is not a true statement. Like you said there are fee’s that the buyer is not allowed to pay or “non-allowables” but over time that has been twisted as the seller must pay. These fee’s can come from anywhere but the buyer in line item fee’s on the HUD. On deals where the seller has had to net a specific amount I have seen these fee’s covered by rebate, loan origination and even agent concessions when the debt ratio was too high to raise loan costs. The big issue that I have seen with VA is there is NO give on the termite work but on FHA if it dosent menion termite in the contract it dosent have to be done.
I’m glad. FHA is for marginally qualified speculators with no down payment, and it’s a huge risk to the taxpayers.
Great article check out my blogs for some info on FHA as well
http://www.rickarvielo.com/post/New-American-Funding-New-American-Direct.aspx
http://www.rickarvielo.com/post/Struggling-Homeownere28099s-Across-the-United-States.aspx
Hi, I’m the original poster of the “Whiskey Tango Foxtrot” on the Piggington.com forums. Believe it or not I got an offer accepted and hope to have keys 45 days from now, assuming the appraisal is good and no little arthropods have been munching on the framing.
Now about those seller-paid closing costs … I got two different estimates from two different lenders. One estimated about $3000 in non-allowables. The other estimated … $50, for a termite report. A cynic might be forgiven for thinking that lenders were exploiting the myth of non-allowables to pad loans with junk fees. I guess I’ll find out at closing.
AK.. Here is a list of the non-allowable fee’s from the VA website. Many don’t apply to California but many do. The fee’s can NOT be paid by a VA buyer but that does not mean that they have to be paid by the seller. I am in the middle of 2 VA transactions right now where I am paying the non-allowables as the lender. I have also seen transactions where the agents have “donated” to the costs.
• lender’s inspections, except in construction loan cases
• loan closing or settlement fees
• document preparation fees
• preparation of loan papers or conveyance fees
• attorney’s services other than for title work charged by the lender
• photographs
• interest rate lock-in fees
• postage and other mailing charges, telephone calls, and other overhead
• amortization schedules, pass books, and membership or entrance fees
• escrow fees or charges
• notary fees
• commitment fees or marketing fees of any secondary purchaser of the mortgage
• preparation and recoding of assignment of mortgage to any secondary
purchaser of the mortgage
• trustee’s fees or charges
• loan application or processing fees
• fees for preparation of a truth-in-lending disclosure statement
• fees charged by loan brokers, finders or other third (3rd) parties whether
affiliated with the lender or not
• tax service fees
• termite inspections (except cash-out/regular refinance transactions).
AK – Congrats! And it is a thrill to meet the guy with the wicked funny sense of humor.
Joe – Thank you for the comment and the very comprehensive laundry list. I will forgive you for the agent “donation” remark.