How to Get Your Offer Accepted: FHA Loan & VA Loan Buyers

There’s nothing more frustrating than being ready to buy, putting in an offer, only for the seller to pick someone else’s offer. This is disheartening when it happens once—you have to love the home enough to imagine living there, after all—but when it happens multiple times? Unfortunately, this happening to so many buyers with FHA loans and VA loans, even with strong offers.

But, why is this? Is it just because the market is hot and the seller is getting crazy offers?

Why is it more difficult to buy with an FHA or VA loan?

I have had a lot of buyers break into the property market using FHA or VA loans but there are two main problems they encounter:

• seller perception
• the amendatory clause that has to be part of every FHA and VA purchase agreement.

The first can be overcome by a good Western Washington realtor, the second is something you’ve got to work with if you can’t get a conventional loan.

There’s currently a third problem for FHA and VA loan buyers, and that’s the market.

The market is highly competitive here in Kitsap County and Western Washington, and similar things are happening in other popular locations in the country. I have been a Kitsap County realtor for many years now and have never seen a more seller-driven housing market. That’s the problem when an area is not only great to live in but offers huge employment opportunities too. Housing is at a premium and the law of supply and demand means that this is good for sellers and not so good for buyers.

To be successful in a market like this as a buyer everything needs to go in your favor because the seller can pick and choose from the many offers they receive.

FHA Loan & VA Loan Misconceptions

The first problem here is the seller’s perception. FHA and VA loans serve a purpose: to help low-to-moderate-income borrowers buy a property. They are designed to help the borrower, particularly in terms of how much down payment a prospective buyer has to find. An FHA loan requires a minimum down payment of just 3.5% and a VA loan of 0%. This allows purchasers to buy property without spending years building up capital before they can do so. That’s great – for the buyer.

Many sellers don’t see it the same way. They tend to figure the more of their own money a buyer wants to put into the project, the better a prospect they will be. So, given the choice of someone with a VA loan, who decides to use the loan for 100% of the amount they offer, and another buyer who is prepared to put in a significant amount of their own money, they go for the “better buyer.” That may not the case, but that’s how many see it.

You have to look at it from the seller’s point of view. Say you have an FHA loan and are prepared to put down 3.5%. Well, you may well be up against other offers that are putting in 5% down, 10%, or even more. When a listing agent looks at the offers, most will think someone prepared to put in 20% of the price with their own money has to be more qualified than someone offering 3.5% or, in the case of a VA loan, nothing at all.

FHA loans and VA loans are not bad loans. They are great loans with good rates and a government guarantee, but that is not how a lot of people think of them.

Like all prejudices, the only answer is education. This is where choosing a really good, experienced Western Washington realtor is so important. You need someone helping you who not only understands FHA and VA loans but is prepared to go the whole nine yards to ensure a listing agent gets the picture, too. There are VA and FHA buyers that have a far lower debt-to-income ratio than those using conventional loans, even those that are prepared to put down a 20% payment. But your agent needs to convince the seller of that fact.

The Difficulties of the Amendatory Clause

A good realtor may help with sellers’ perceptions about FHA and VA loans but they can’t remove the amendatory clause that is written into every single VA and FHA loan agreement.

The amendatory agreement is, in layman’s terms: If the property does not appraise, you do not have to move forward as the buyer.

This is good news for the buyer. It’s not so good for the seller. It means that if their property doesn’t appraise for the offer you’ve put in, you can pull out or negotiate a different price.

Now, imagine that seller has three offers on the table and while yours, with your FHA loan, may be the highest, it’s more of a risk than the next offer that is for just a little less and is happy to waive the appraisal contingency entirely. The amendatory clause means you always have an opportunity to pull out. 

As an FHA or VA loan borrower, there is nothing you can do to remove the clause.

Again, looking at it from the point of view of the listing agent and seller, which offer would you choose?

The problem is aggravated by the marketplace. If a seller receives multiple offers, why take a chance? Why go with the buyer who has an amendatory clause written into their agreement when others don’t? It’s usually a no-brainer.

How to Get Your Offer Accepted

This part of the country is a great place to live, and, even if you are struggling to get an offer accepted, it is worth persevering. VA loans are specifically for those who have served in the military, and we are all incredibly grateful for that service, but you still have to understand the market and the difficulties buyers using VA and FHA loans face.

It is difficult for all buyers at the moment, whatever the source of the loan. Houses are being snatched up, almost sight unseen, at prices above list price because there is so much competition. It won’t always be like this and as inventory increases the market will calm down.

Keep this in mind when you are searching for a home. It can be discouraging when offers are rejected, and even more so if you get no response at all. But try not to lose heart. With effort, a good realtor, and a little bit of good fortune, there is a house out there for you. The right realtor will be able to negotiate on your behalf and make sure sellers know what you have to put forward.

I’d love to help you move to Kitsap County and this area of Washington State. I have helped so many people find their perfect home and have the whole process dialed in. I’ve helped people with conventional loans, VA loans, and FHA loans, so I know all the ins and outs that need to be considered when putting an offer on the table. If you have any questions at all about how to get in a strong position or any other aspect of moving to Kitsap County or Western Washington, I’d love to hear from you – you can find all the best ways to reach me here