When Josh Williamson enlisted in the Army in 2004, the 9/11 terrorist attacks were fresh in his mind.
“I felt like it was something that was my duty as an American and someone who honestly cares about our country — enlist in the military and serve,” he said. “I always had that sense of patriotism.”
He deployed to Afghanistan in 2006, and Iraq in 2009 as an infantry mortarman. He left the military the next year and last fall he married Lilia.
Next on their list? Buying a home.
But after making offers on a few homes, something seemed off.
“We realized we were being rejected every time,” Josh Williamson said.
Nathan Kent Harber and his wife ran into the same problem.
He’d been in the Army for nearly a decade, serving as a field artillery officer in Iraq during the fall of Baghdad.
Two years ago he wanted to upgrade to a larger home to accommodate his growing family.
“We were looking for a home all through summer 2015, and we had put in several offers at different homes,” he said.
All were rejected.
Like thousands of other South Sound buyers, the Kent Harbers and Williamsons were trying — without success — to pay for homes using loans from the federal Department of Veterans Affairs, a benefit veterans and active duty military members have earned since Congress created it in 1944.
“It’s a competitive market,” Josh Williamson said. “I don’t think that it’s all due to the fact that we … have a VA loan, but I think that’s a big part of it.”
It certainly is, local real estate agents say.
VA loans come with red tape, appraisal delays and fees borne by sellers instead of buyers — all reasons offers are being rejected, agents say. In addition, real estate agents and veterans say, some sellers reject offers because of misconceptions about the VA program.
Some agents advise home sellers to take conventional loan or cash offers, even if they are lower than VA offers, because those options are perceived as less hassle than VA loans.
“I think some sellers are becoming discriminatory on the advice of their agents,” said Pat Brewer, a real estate broker at Coldwell Banker Bain.
And unlike other forms of housing discrimination — by race, national origin or disability, for instance — sellers can disqualify an offer from a VA buyer simply because of their method of financing, says Brooke Villano, a branch manager at Veterans Lending Group in Puyallup.
“No agent wants to say they are discriminating against a VA offer, but that’s potentially what’s happening,” Villano said. “Choosing a conventional offer over a VA offer is not considered discrimination.”
PLUSES AND MINUSES
The Kent Harbers and the Williamsons are far from alone in trying to use VA loans.
So far this year, more than one in 10 buyers statewide — more than 2,900 — has used a VA loan, according data from the Northwest Multiple Listing Service.
In Pierce County, nearly one in five buyers or almost 900, used VA financing, along with more than one in four Thurston County buyers — 428 — through the start of May.
Many veterans are reluctant to give up the benefit in favor of a more conventional loan, even if it means a better chance to score a home, because of the clear financial advantage.
“The benefits for the veteran are tremendous,” said Greg Nelms, chief of loan policy with the VA mortgage loan team.
VA buyers don’t have to put money down to buy a house. And because the VA guarantees the loan, the buyer doesn’t pay for private mortgage insurance, a cost that can add up to another 1 percent on top of the purchase price.
The interest-rate savings on a $300,000 loan, for instance, could be as much as $50 to $100 a month for a VA loan compared to conventional financing, said Heather Hendrix, a senior mortgage specialist with Directors Mortgage.
VA buyers are more common in Pierce and Thurston counties than elsewhere because of Joint Base Lewis-McChord, said Pat Maddock, a Realtor with Coldwell Banker Bain.
“Active duty military hang up their uniforms and stay right here,” said Maddock, a veteran who served 21 years in the Air Force. “A lot of people are stationed here, and it’s their first experience in the Pacific Northwest and they fall in love with it and stay as long as they can.”
But they can run into problems.
Jim Swanson, a Realtor with Windermere Professional Partners who works with VA buyers, said it feels as if the market is “very much against VA buyers.”
“This is my tenth year in the business,” he said, “and for the first time ever, I’m unable to compete with other buyers.”
Military members move as frequently as the service requires them to. That means they often don’t have the ability to buy a home and build equity like those with more stable employment. When the market is strong, Swanson said, those using veteran financing simply cannot compete.
“We live in a community that’s full of military presence. Somehow we have to do a better job,” Swanson said.
In Nathan Kent Harber’s case, after getting nowhere using a VA loan, he considered using a conventional loan.
“But then it changes your financials, how much you put down, the interest rate you’re going to get,” he said of conventional loans. “You can’t afford the home you could get through the VA (loan).”
All last summer, the Kent Harbers searched for a home for them and their two young children.
As the market was heating up, they put offers on several homes, but nothing stuck. Kent Harber thought for sure they’d get one after including an escalation clause to their offer — where their bid increases when another buyer offers more, up to a set amount.
But what he thinks tipped the scale against them was not how much he and his wife offered, but that they were going to pay for their new home with a VA loan.
“It’s just challenging when you’re competing for a home you love and you really want to buy it, and the benefit you think you should be able to use is hurting you in the process,” he said. “That’s sad.”
Buyers depending on VA loans face several hurdles in a real estate market where multiple offers are becoming the norm rather than the exception in the South Sound.
Some sellers are asking more of buyers, some of whom are desperate enough to waive home inspections, or write love notes or essays in hopes of catching a seller’s attention.
And as the market heats up and offers pile up, sellers can afford to pick and choose among buyers. That means offers perceived to be more of a hassle, VA loans in particular, are cast aside.
Real estate agents around the South Sound told The News Tribune that appraisals for VA loans can take much longer than for conventional loans. Agents say the appraisers sometimes don’t meet VA guidelines that say appraisals should be completed within 14 days in Washington state.
VA home inspectors can be overly picky as well, they say.
“When you have multiple offers coming in and you have people doing bids at the front door for the house due to the shortage that we’ve had, you can’t wait 90 days for an appraisal,” said Brewer, the Coldwell Banker Bain real estate broker.
Part of the delay in past months has been because VA appraisers were paid less than appraisers for conventional financing, said Hendrix, the mortgage specialist with Directors Mortgage.
In a statement, Jeff London, director of Loan Guaranty Service at the VA, said appraisers since have been given a pay bump to reduce delays and the agency has tried to recruit more appraisers to the field.
“These efforts have been successful in significantly reducing the inventory of outstanding unassigned appraisals, but some remaining inventory exists because no appraiser is available to immediately take the case,” London said.
Since last year, delays have eased, Hendrix confirmed, adding that the VA has bumped pay for each appraisal to $800 from $500.
Sellers also worry that accepting a VA offer will cost them more — and in some cases it can, said Nelms of the VA mortgage loan team.
“We do have limits (on fees) that veterans can pay, but that does not limit the lender from paying the costs, and if necessary the seller,” he said.
Many real estate agents said sellers will have to pay for escrow fees, rather than splitting that cost between the buyer and seller. The difference can be hundreds of dollars.
But the reality is not as bad as the myth, said Mary Wiley, a real estate broker with Allen Realtors who’s been in the business for more than four decades.
“Sellers hear misinformation and horror stories,” she said. “They think the VA is going to be a lot harder for them. The stories of the past really aren’t true anymore.
“As long as you are getting the same net or better from a VA buyer as you would through a conventional buyer, why not take it?”
ADVICE FOR VA BUYERS
So what can VA buyers do to increase their odds of success? For one thing, Brewer said, be realistic.
“They deserve (a VA loan) as a veteran and that’s what the rules are,” she said. “But I also let them know we are in a market where there are multiple bids on almost every listing.”
That means VA buyers might have to offer more money to come out on top, Wiley said.
“They need to pay over list price for us to have a chance,” Wiley said she tells her VA buyers. “That’s hard for a buyer to swallow.”
A flexible lender who is familiar with the program can make a difference.
The VA limits the types of fees veterans must pay to prevent them from being taken advantage of, up to 1 percent of the home’s cost, said Nicole Moore, operations manager at Veterans Lending Group, which specializes in VA loans.
However, some lenders interpret that to mean some costs — including escrow fees — must be paid by sellers instead of shared by the buyer and seller. That’s not true, Moore said.
“If we are not charging more than 1 percent on any of these non-allowables, they can pay the escrow fee and any other non-allowable,” she said.
Mark Connors, a lender liaison with the VA, said it took a conversation with a seller to get him to accept Connors’ VA offer. He said the seller’s agent insisted he use another form of financing.
“At that point I said, ‘If it’s not a VA loan, it’s off the table,’” Connors said. “I had a conversation with the seller — retired military to retired military — and it ended up going through fine and used VA financing.”
HOMEOWNERS – FINALLY
In the end the Kent Harbers landed a home in Tacoma’s North End — with a VA loan.
In the Williamsons’ case, the couple made offers on 15 homes in Puyallup or Tacoma — and they still didn’t win one.
“The first four houses we put $15,000 above asking price and they never seemed to take our offer, or even give us a counter offer,” said Lilia Williamson. “They went with somebody else.”
Their real estate agent found a home in Puyallup that wasn’t yet on the market. The couple is in the process of closing, Josh Williamson said.
They’re paying with a VA loan.