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Recently, a Seller entered into contract with a military Buyer who wanted to purchase their house using 100% financing through the VA home loan. The transaction went along smoothly enough, along through the inspection process. Then the Buyer’s lender ordered up the appraisal.

Unfortunately, the VA sent an ‘out-of-state’ appraiser not familiar with their market who used only a 1 mile radius around the subject property for finding comparable properties to determine her valuation. As a result, the home was appraised for almost 20K less than what the Buyer and Seller had agreed upon. In addition, the Buyer had also requested for the Seller to contribute $5K towards closing costs.

Both the Selling Agent and Buyer’s Agent submitted comps within a 2 mile radius of the subject property. The Buyer clients, knowing that the house was competitively priced and would not find anything remotely close in value within their price range, also got involved in writing letters to the VA.  Even the bank that was financing the deal  agreed that the 1 mile radius imposed by the appraiser was unfair and that the appraisal should be contested.  They took the agent’s comps and sent them onto the VA in a Request for Change of Value.

After more than two weeks and numerous errors, i.e.,  paperwork lost, given to the wrong person, the parties were informed that the Request for Change had been refused.  No reason or explanation was provided.

To compound their problems, the Sellers had been waiting for the appraisal results so they could act upon a counter offer for buying another house  – a house than they would now lose because other competing offers had come in on the property.

To make matters even worst still, both Buyers and Sellers will now miss their eligibility for the Federal Tax Credits being offered which end on April 30th.

This is yet one more example of the flaws inherent within the VA appraisal process and how people’s lives are impacted negatively as a result.

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Rich Jacobson is a licensed real estate professional providing knowledgeable empowerment and relentless representation for his clients of residential properties and vacant land throughout all of Kitsap County WA and portions of Pierce, Mason, and Jefferson Counties. You can also find him at KitsapLife.com, ActiveRain, Everyday CK, and Crabbing in the Hood, or e-mail:  kitsapagent@gmail.com

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Posted in Mortgage Bites, VA Financing | 3 Comments »

Tags: bangor subase, Bremerton WA Real Estate, Kitsap County WA real estate, va appraisals, va financing, va home loans

As a licensed real estate professional here on the beautiful Kitsap Peninsula in scenic Washington State, I have the privilege of serving a very large military community, comprised primarily of active-duty US Navy personnel  and their dependents stationed at Naval Base Kitsap.

Given that fact, many of the Buyers and Sellers I represent are party to transactions  that involve VA Financing. As a Navy veteran myself, and former submarine sailor, I have firsthand experience with the benefits of using a VA home loan. Our first two homes were purchased using VA Financing. It’s one of the few ‘Zero-Down‘ loan products still available in today’s lending market.

I take my roles and responsibilities as an agent very seriously, especially as it relates to representing my clients best interests. It’s not about me, or what’s in it for me, but what is best for my clients and helping them successfully achieve their home buying or selling goals.

One my tasks in a real estate transaction  is anticipating any potential problems or pitfalls, and ensuring the entire process goes smoothly. This skill is acquired through an intimate understanding of the real estate business, maintaining clear lines of communication, and many years of experience as an agent.

Unfortunately, regardless of how hard I may try, there are times when certain circumstances are beyond my ability to influence or control. Such can be the case with VA Financing, and, in particular, VA Appraisals.

Many times, VA Home Buyers are under the false assumption that once the home/pest inspection is completed and associated repairs are negotiated with the Sellers, that things will progress rather smoothly until closing. However, even after you conduct the home inspection, the VA Appraiser may find additional problems (or ‘conditions’) that will need to resolved/repaired before the loan can be funded.

Case in point:   In one of my recent VA transactions, my Sellers had a large cedar deck off the back of their house. At its highest point, the deck was 24 inches above ground level. The deck did not have any railings or handrails.

In our area, VA Appraisers use the WA State Building Code to determine allowable deck height before railings need to be installed. If a deck is 30 inches or more above ground level, then railings are required. Based on this, I counseled my Sellers not to install the railings.

After the Buyer’s Home Inspection was completed, the VA Appraiser conducted his analysis. The home came in at value, and there were NO conditions. Or so we thought…..

A week or so after the appraisal, some ‘salary-justifying’ bureaucrat in the VA Regional Office in Denver disapproved the appraisal, citing a health/safety issue. The VA Appraiser was told to amend the appraisal and insert a condition that now required for railings to be installed on the deck.

When we attempted to gain some clarification on the ruling, we received a very rude and abrupt response.

“If you want the loan to fund, install the railings, PERIOD!”

I wondered to myself – “At what point/height does a deck become a safety concern? Two inches above the ground? 10 inches? 30 inches?”

You would think the VA would use some kind of uniform standard to make consistent determinations in such instances.

Unfortunately, in this instance, the determination was simply the personal, subjective opinion of someone stuck in a cubicle in Denver as to what constitutes a safety/health issue.

Luckily, we moved on from there, and the transaction finally closed. But not before a lot of unwarranted stress and delays were added to the process.

Not all VA transactions are problematic, like this one. VA Home Loans are still one of the best lending products available for veterans and active-duty personnel. Still, it’s important for Buyers and Sellers to be aware of such potential difficulties.

Got any VA Loan or Appraisal horror stories? Feel free to share. The more consumers are aware of such things, the better prepared they’ll be!

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Rich Jacobson is a licensed real estate professional providing knowledgeable empowerment and relentless representation for his clients of residential properties and vacant land throughout all of Kitsap County WA and portions of Pierce, Mason, and Jefferson Counties. You can also find him at KitsapLife.com, ActiveRain, Crabbing in the Hood, Facebook, Twitter, or e-mail:  kitsapagent@gmail.com

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Posted in Mortgage Bites | 2 Comments »

Tags: Kitsap County WA real estate, naval base kitsap, va appraisals, va appraisers, va financing, va home loans, va transactions

One of the best things about living here on the Kitsap Peninsula in scenic Washington State is that we have the good fortune of being part of a very large and thriving military community. Our area is home to thousands upon thousands  of active-duty Armed Forces members faithfully serving our Country, along with their dependents, and many retired veterans as well.

Under the collective command of Naval Base Kitsap, there is the Puget Sound Naval Shipyard in Bremerton; the Naval Undersea Warfare Center in Keyport;  and the expansive Bangor Submarine Base. As a licensed real estate professional serving clients throughout Kitsap County WA, I have had the good fortune and pleasure of working with many of these hard-working, dedicated patriots and their families.

A good many of my active military or veteran clients elect to use VA loans for their home financing. As a veteran myself, my first two homes were purchased using VA loans. It can be an excellent choice of financing products to use, requiring very little out-of-pocket expense, and with fairly competitive rates.

However, one of the potential drawbacks or difficulties associated with VA financing can be the appraisal process. Simply being aware of this possible pitfall helps to prepare my clients ahead of time.  It’s something that I always take time to educate my Buyers about fully.

Here is the process in a nutshell:

As a Buyer, your agent diligently assists you in finding a home that meets your needs. Once you find the right home, you submit an offer, and hopefully, your offer is accepted. At that point, you hire a licensed inspector to conduct a full home & pest inspection, and identify any items that need to be addressed/repaired. After the inspection results are negotiated to the satisfaction of both Buyer and Seller, you will enter the “pending” stage of the transaction. At this point, your Mortgage lender will contact VA, and they, in turn, will order an appraisal to determine if the property can be valued at the price that you have agreed to pay for it.

Here in Kitsap County WA, our mortgage partners rarely know who the appraiser will be in a given transaction. It’s a Russian roulette. If you’re an approved VA appraiser in Washington State, your name is simply added to the list, and whoever is next on the list gets the call. It may be someone local who knows and understands the nuances of our market. Or it can be someone from another county altogether.

In most of my experiences, the VA appraisers have been fair and reasonable. But there are times when they can be extremely picky or subjective. Usually, they try to stay focused mainly on major structural components and primary systems. They evaluate the roof, foundation, plumbing, electrical, heating/cooling, etc.. Unfortunately, on occasion, they can become overly critical of other aspects of the home that are not necessarily critical to safety or proper function/operation. These aspects then become ‘conditions for funding’ and require resolution before the transaction can close.

Many Buyers assume that since the home inspection was performed, and the Sellers may have agreed to repair the things they requested, that everything is pretty much a “done deal” until closing. Unfortunately, there may be some additional items that the VA appraiser will call out that need to be remedied or repaired prior to closing. In some instances, these items can be small and easy to resolve, or they can present significant challenges and even cause the transaction to fall apart.

Additionally, in a slower, declining market, appraisers tend to be much more critical in their analysis of comparative property sales. Valuations can come back ‘under’ value and may require a re-negotiation of the contract sales price between Buyer and Seller.

An experienced real estate agent will wisely counsel their Buyers not to assume anything and to wait until the full appraisal results come back. Hopefully, the appraiser will not find any problems or issues that were not identified during the home inspection, and the appraisal will come in at value. If that’s the case, then the rest of your home buying experience should move along fairly smooth to closing, and you will successfully achieve the Next Adventure in Life!

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Posted in Bremerton WA Real Estate, Buyers, Mortgage Bites | 4 Comments »

Tags: va appraisals, va appraisers, va loans

Some tenants are better than others. Yet no matter how ethical a tenant might be, or how diligent in paying the monthly rent, even terrific tenants can get badly hurt by a foreclosure.

Landlords don’t usually discuss their financial problems with their renters. Why would they? If the property owner is falling behind on his/her mortgage payment, they fear that if the tenant finds out, the tenant might just follow suit and quit making the rent payment. And the landlord, headed for foreclosure,  needs money badly. Tenants of rental properties are often among the last to know about a pending foreclosure.

A landlord’s  foreclosure leaves a tenant in a precarious position and can potentially have a lasting effect on the tenant’s future ability to rent as well as throwing the tenant’s life into disarray while they scramble for housing unexpectedly. The scramble for a new home is a short-term problem. There are other pitfalls for renters, that can last for years beyond the foreclosure, and have a much more significant impact on the renter’s future.

When a lender “takes back” a home through foreclosure, the lender’s primary goal is to sell the property as quickly as possible. Empty properties are easier to sell than occupied properties. The lender, determined to sell quickly, must take steps to make the house as sell-able as possible. These steps often include emptying the house of it’s occupants. In other words, and eviction takes place. And here is where tenants can get hurt.

An eviction is a formal, legal action. Many legal actions are part of the Public Records. And Public Records are part of a Credit Report. So a tenant can end up with an Eviction on their Credit report! This can happen even if the tenant does not fight the eviction. Many lenders will “follow protocol” just to be sure future litigation cannot happen. Protocol in this case is a legal eviction. The lender, wishing to have a perfect “paper trail” of documents, can insist on following the letter of the law with regards to an eviction. They insist on following the process to it’s bitter end.

The ripple effects of the current mortgage market continue to surface in unexpected ways.  If you are a renter and find yourself in this unpleasant situation, document everything (make copies of any communications, and make written notes of any verbal conversations). You might want to consider speaking with legal counsel just to be safe. And make copies of all your rent checks (front and back) in case you ever need to prove that you made all your rent payments on time.

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Posted in Credit Bites, Foreclosure, Miscellaneous, Real Estate Bites | 3 Comments »

Tags: bremerton real estate, kitsap real estate, port orchard real estate, poulsbo real estate, silverdale real estate, washington state foreclosure

John and Mary are frightened and more than a little upset. They need to ask for an extension on the closing of their new home purchase because the financing is not ready. They made an offer on their new home 26 days ago and had no idea their Loan Approval Letter was not worth the paper it was written on! Now their Earnest Money is at risk and the money they already spent on a moving company is in question. In addition, they have already paid for the appraisal.

When is a loan approval not a loan approval?

This is not a frequent occurance. It does happen often enough that savvy Realtors® and experienced sellers are somewhat wary of Mortgage Pre-Approval Letters from loan officers they don’t know through previous transactions. The reason they are wary is simple. Experienced Realtors® know that Pre-Approval Letters are written by loan officers, and loan officers can’t approve loans!

The who’s who of a mortgage transaction.

A Loan Originator is the real name for a person like me who is more commonly called a Loan Officer. A loan originator does exactly what the title implies. He or she creates (or originates) mortgage business. A loan originator’s primary job is to supply a never-ending flow of new loan clients. The title of Loan Officer is rather misleading. A good loan originator does not have to work very hard to maintain a flow of business. Previous happy clients and satisfied Realtors® will keep him or her pretty busy without the need to spend much time marketing.

After they find a client to work with, loan originators are responsible for making certain everything that must be done to close the loan, is indeed accomplished. This includes coordinating a Title Company, an Appraisal Company, a mortgage processor, two Realtors® (one for the buyer and one for the seller) and of course, the borrower. But, a loan officer does not approve loans.

The Loan Underwriter is an employee of the bank. The underwriter’s job is to make sure the borrower (represented by the Loan Originator) fits the Lenders Guidelines for Approval. The underwriter is the person who actually approves the mortgage loan. Very few borrowers ever speak with a Loan Underwriter. Many underwriters prefer it that way. They are busy people who want to be able to move quickly from one loan to the next. There jobs are dependent on speed and accuracy. Getting bogged down with client phone calls does not help with either speed or accuracy.

Whether you, as a borrower, are working with a Bank or a Mortgage Broker, your primary contact is probably a Loan Originator, not an underwriter.

How do you make sure your Pre-Approval Letter is worth something?

A Loan Commitment Letter is the document an underwriter sends to the loan officer once a loan is approved. This is the real thing! A commitment letter will detail every aspect of the mortgage. It will include the terms and interest rate. It will itemize the “Conditions” (the items that must be provided or explained for final approval). The commitment letter will be dated and it will have an expiration date. It may be signed by the underwriter. The Loan Commitment Letter is a formal, legally binding document.

So, if you want to be sure your pre-approval is really an approval, request to see the Commitment Letter! If you are unfamiliar with anything in the letter, have your loan officer explain the unfamiliar portions. It is after all, your loan commitment letter and there is no reason you shouldn’t see it!

In Washington State and many others, the seller has the right to request this proof from the Buyer’s Agent. If the seller has a savvy Agent, the Agent will verify the validity of the Pre-Approval Letter by requesting a Loan Commitment Letter.

In John and Mary’s case, had they simply known to ask for a copy of their Loan Commitment Letter, they would have found out that the loan was not yet approved when the Pre-Approval Letter was written. It shouldn’t have happened the way it did, but this happens often enough that as an educated borrower, you must verify that your pre-approval is a genuine approval.

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Posted in Miscellaneous, Mortgage Bites | 9 Comments »

Tags: bremerton real estate, first time homebuyers, port orchard real estate, poulsbo real estate, silverdale real estate