THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Saturday, May 20, 1995 TAG: 9505180623
SECTION: REAL ESTATE WEEKLY PAGE: 04 EDITION: FINAL
TYPE: Cover Story
SOURCE: BY JANET DUNPHY, SPECIAL TO REAL ESTATE WEEKLY
LENGTH: Long : 160 lines
Every three weeks, the Department of Veterans Affairs buys two full pages of newspaper advertising, typically listing several hundred homes for sale in Hampton Roads.
Many readers quickly scour the paper seeking out the dwellings on the market.
More and more people are discovering the benefits of buying a home through the federal agency that guarantees mortgage loans to military veterans. Among the benefits are lower closing costs, often a lower interest rate and a quicker closing period.
Closing costs are lower because VA does not use lawyers.
Many consumers don't realize that the general public may buy from and even obtain a mortgage through VA.
Other federal agencies also offer houses for sale.
Recently, the VA's Roanoke Regional Office, which oversees all of Virginia except the Washington suburban area, had 1,052 homes for sale with more than 80 percent of them in Hampton Roads.
The newspaper ads explain the terms under which the VA homes are sold, including how to bid, the down payment, property descriptions and any flaws in the property. Veterans with a certificate of eligibility, or entitlement, are not required to make a down payment.
A recent ad listed 273 dwellings for sale by VA. Circumstances vary but these are generally homes that veterans have lost through foreclosure.
The houses are priced at market value after VA has conducted a property appraisal and a local real estate agent has performed a market analysis. ``We have every price range in the area,'' says Jeane Blevins, a realty officer in the Roanoke Division.
Any licensed real estate broker may assist a potential buyer, Blevins says. VA will pay a 6 percent commission. Potential buyers may obtain information about a house by phone through VA's Remote Bulletin Board System by keying in the original loan number or the property's address.
Bids are accepted for 13 days, except for the ``first-comes,'' or homes that didn't sell during previous listings. Sometimes first-comes need a price adjustment or perhaps a prior contract fell through, Blevins says.
They vary, of course, but the homes in our area are usually quite nice,'' says Sara Shield of Shield Realty in Virginia Beach. ``Some are only 2 years old.''
Shield says some consumers are surprised that VA expects the market price for the foreclosed homes. ``I think people have the idea that they're going to get a deal. Sometimes they do and sometimes they don't.''
Bob Crain, VA property manager and associate real estate broker at Century 21 Action Plus in Norfolk agrees: ``The one thing the buyers seem to understand is that the VA is going to give the house away. They (VA) try to get the maximum dollar that they can.''
Several times Shield has seen the price of a home bid up from what VA was asking ``because it's a hot property.'' She recalls one house in Cape Story in Virginia Beach was bid up by $10,000. The buyer felt he could afford it because he expected to save money by using VA as a lender.
VA generally accepts the highest bid on a property. Selling VA homes can be profitable for brokers, Shield says. Since only one broker is involved, she gets to keep the full 6 percent commission instead of splitting it with another agent.
Melissa Bowers bought a two-bedroom condominium in Chesapeake from VA last summer for $72,000 after a friend who had bought a VA dwelling ``convinced me it was time to stop renting.''
Bowers says she didn't hesitate about buying a foreclosure, but she admits, ``You don't know what you're getting. They just want to get rid of the house.'' Still, she had hers inspected by friends who were plumbers and electricians and everything was OK.
``It was in great condition,'' she says. ``I love it. I'm pleased.'' Bowers, who went through personal bankruptcy seven years ago, used VA funding.
The number of defaults on VA homes has actually dropped over the past several years, Blevins says, which has resulted in a smaller inventory. There are some 300 fewer houses for sale in Hampton Roads now than a year ago.
That's partly because VA is working harder to keep veterans from losing their homes to foreclosure, says Don Dennehy, an assistant loan guarantee officer in the Roanoke VA office. If a veteran is having problems making mortgage payments, VA encourages him to make immediate arrangements with the lender.
If the lender and homeowner can't work out a plan, VA can buy the loan and restructure it so that back payments are included, Dennehy says. ``It's a dual benefit,'' he says of the refunding program. ``The veteran keeps his house and hopefully we won't have to go through foreclosure and risk losing money.''
Dennehy says the lender usually begins foreclosure only after other alternatives are exhausted, which is when the homeowner is delinquent four to six payments.
First, the property goes to a trustee sale by the lender. Once the sale is complete, VA reimburses the lender the difference between what's owed under the mortgage and the amount it sells for.
If the property is not sold to a third-party bidder at the trustee sale, the lender purchases the property and transfers it to VA. The lender then reimburses the lender for the claim and the property value. The claim is a percentage of the original loan guaranteed by VA.
For loans made after Jan. 1, 1990, veterans are not required to reimburse VA for the claim unless they want to restore their entitlement.
``Our purpose is to protect the veteran if we can but also to protect the government,'' Dennehy says.
The Roanoke office made more than 30,000 loans in 1991, including non-foreclosure cases. Defaults are down about 15 percent from 1993 but loans are actually up, Dennehy says, which he attributes to new loans obtained under refinancing measures.
``I think more and more investors are buying them,'' says Crain. One problem, he says, is that many buyers want to move up to a larger home and are interested in buying a foreclosure.
But VA will not consider a contingency offer - the condition that someone will buy when his current home sells. Crain advises consumers interested in a VA house to make sure they use a real estate agent with experience in VA foreclosures.
``It isn't like buying from a private seller,'' he says. ``Buyers should be aware that properties are sold in an `as is' condition.'' For example, Crain says VA rarely agrees to fix problems discovered during the walk-through prior to signing the contract.
Also, a lender usually requires a termite inspection and any damage to be repaired at the expense of the seller. However, VA will not repair any damage from termites or moisture, but the agency will treat active infestation.
Other government agencies, including the U.S. Marshal Service, the Resolution Trust Corp. and the Department of Housing and Urban Development, also dispose of real estate by selling it to the public. Rheba Gwaltney, director of the single-family housing division in HUD's Richmond office, says that program is similar to VA's.
HUD's Federal Housing Authority loans make housing more affordable for minorities, single heads of households and first-time buyers. ``The guidelines for FHA loans allow for more flexibility in the underwriting standards than conventional loans,'' Gwaltney says.
Properties foreclosed under HUD terms are first offered for sale to non-profit groups and local governments, then owner-occupants and, finally, the general public. Owner-occupants must live in the home while the general public may buy it for a family member or lease the home, Gwaltney says.
Pull-offer bids are accepted daily. If a consumer is not offering the full amount, he must wait the entire bid period, usually 10 days, before finding out whether he got the property. About 40 HUD homes were recently available in Hampton Roads.
Like VA, interested buyers may consult any licensed real estate broker about HUD homes. The Richmond HUD office has the same jurisdiction at VA. ILLUSTRATION: Staff photo by Jim Walker
[Melissa Bowers holding a dog, color cover photo.]
Melissa Bowers bought her VA condo after a friend convinced her to
stop paying rent.
Graphic
BUYING FROM UNCLE SAM
A real estate housing fair is scheduled today from 10 a.m. to 4
p.m. at the Founders Inn and Conference Center, Virginia Beach to
educate the public about buying government-owned real estate.
Representatives from the Department of Veterans Affairs, the Farmers
Home Administration, the General Services Administration, the
Department of Housing and Urban Development and the Small Business
Administration will be present.
A government-owned real estate auction of more than 50 dwellings
will be held at 6 p.m. June 16 at the Marriott Waterside in
Norfolk.
KEYWORDS: VETERAN ADMINSTRATION VETERANS AFFAIRS < by CNB