What special conditions do VA foreclosures have?
The Department of Veteran Affairs (VA) deals almost exclusively with ex-military personnel and acts as a guarantor on mortgages organized through third part lending agencies. In the event that a property owner defaults on their mortgage payments so badly that the lender prosecutes a foreclosure, the VA will acquire the property from the lender, closing the mortgage and will attempt to recoup its costs through auctioning the foreclosed property.
The Foreclosure Process
A grace period will be given to defaulting mortgagors in an attempt to motivate them to make the loan current. This can be a period of 4 to 6 months depending on the circumstances. If the situation is unchanged after this time the lender will serve a notice to foreclose. This process can take a further 2 to 4 months to complete, meaning that a property can be in limbo for the best part of a year.
Foreclosed properties appear on paper to be a great deal but buyers should always be aware that, because they have been neglected for a period of time, a certain amount of repair and renovation work may be necessary to bring the property up to its proper market value.
VA Auctions
You can bid on a VA auction through a network of real estate brokers spread throughout the country in every state. A down payment of earnest money ranging from $100 to 5% of the purchase price must be lodged, along with the completed paperwork, at the realtor’s office. Your bid will then be submitted, usually electronically but sometimes by fax to the VA auction. There is a period of 12 days during which bids are placed. All bids are deemed to be submitted simultaneously, so there is no benefit given to early bids and no penalty for bids made late in the period. At the end of the auction the referee will decide if the highest bid meets the requirements of VA and will contact the realtor. As is the case with most government auctions, purchasers intending to become owner-occupiers will be given priority over other bidders.
Conditions of Payment
If you are a vet yourself you can take advantage of a VA loan to meet the total cost of the purchase. Otherwise you can pay using your own capital or any other financing arrangement.
If you find yourself in a position where you are unable to complete the sale, contact VA immediately. Depending on the circumstances you may have the total deposit refunded. If you fail to contact VA and fail to complete the purchase within the timeframe detailed on the contract you will most probably forfeit all of the deposit.
In general, buying a VA foreclosure is no different from any other foreclosure transaction. The inside of the house may have been converted substantially to cater for a disabled resident which may cause extra refurbishment work to reconvert to a standard format but the previous owner will have been no different from any other financially troubled citizen. Otherwise VA foreclosures represent some of the best value in real estate available to those willing to try.