Historic, old, rundown or fixer-upper. Older homes come in various stages of repair.
There's a common misconception that VA buyers can only purchase newer homes with their VA home loan benefits. The truth is, VA buyers can purchase older homes. But they'll need a knowledgeable real estate agent to identify the homes that meet both the buyer's requirements and the VA's.
Minimum Property Requirements are physical attributes a home must have to be considered safe, structurally sound and sanitary. Appraisers look at MPRs while conducting the VA appraisal. If the home doesn't meet MPRs and local code, these issues must be remedied or repaired prior to closing or will have to be accounted for with an escrow hold back arrangement. It's imperative for agents to have a good grasp of the MPRs because buyers rely on agent advice when selecting homes.
Here are some basic MPRs to be aware of:
Functioning mechanical systems. Mechanical systems must be safe to operate, protected from the elements and have adequate capacity and quality to operate properly for the home. These systems also need to have reasonable life remaining because they can be expensive to replace. If a VA homebuyer purchases a home and then has to turn around and replace a major mechanical system it could cause them significant financial hardship, something the MPRs are designed to prevent.
Adequate heating. The MPRs require all homes to have heating systems to provide for comfortable living conditions. If the property's primary source of heat is a wood-burning stove there must also be a backup heating source with the capacity to maintain a temperature of 50 degrees Fahrenheit in areas of the home with plumbing. This requirement was designed to prevent bursting pipes. If you work in portions of the country that are warm year-round, check with your VA field station to determine if the heating requirement can be waived.
Roofing. The roof needs to be in good repair, prevent moisture from entering the home. It also needs reasonable life remaining to prevent financial hardship for the buyer.
Basements and crawl spaces. Both types of spaces need to be dry. Any pooling of water or excessive dampness will be noted in the appraisal and have to be remedied. Crawl spaces must be accessible and provide enough room for maintenance and repairs.
Lead-based paint. If the home was built before 1978, it's assumed lead-based paint is present. All defects in paint on the interior and exterior of the home must be corrected. This includes chipping, peeling and cracking paint. All areas identified by the appraiser will need to be cleaned to remove the damaged paint, and repainted or covered with permitted materials such as plywood or plaster.
Pests. If any active wood-destroying infestations, dry rot or fungus are identified, the property must be treated prior to closing on the home.
Water and sanitation. Every home must have access to hot water and the water supply must be safe for drinking. Every home must have sanitary facilities and safe sewage disposal.
The VA established MPRs to protect veterans. The likelihood of running into a MPR issue is greater with older homes because there's wear and tear not present in new construction. Whether the current homeowners have taken care of the property will greatly impact the likelihood of the home meeting VA appraisal guidelines. The home inspection will be an early indication of the home's ability to meet VA guidelines.
Home inspections are not required on VA home loans, but they're invaluable, especially with older homes. Look at the inspection closely and check on the remaining life in all major systems and the roof. Also check to ensure the home meets the common MPR qualifications listed above. If any issues arise, it's better to start negotiation for repairs early on. You may even be able to get some repairs made prior to the appraisal.
The home inspection will also give you and your buyer the opportunity to scrutinize the property and possible repairs to determine if this is a purchase they still want to pursue. The inspection might come back with numerous costly issues that either the seller refuses to pay or that would push the timeline of closing further out than your buyer would like. Weigh the pros and cons with your buyer before moving forward with the appraisal. If they need to walk away, they'll thank you for saving them the additional expense of an appraisal.
Run-down or fixer-upper homes aren't likely to meet the VA's Minimum Property Requirements without considerable work. But well-maintained older properties may be a great fit for your VA buyers. Keep the minimum property requirements in mind when showing a home and you'll be on the right track.
Answer a few questions below to speak with a specialist about what your military service has earned you.
VA loans allow Veterans to have a co-borrower on the loan. Here we break down co-borrower requirements and provide common scenarios around co-borrowing and joint VA loans.
Your Certificate of Eligibility (COE) verifies you meet the military service requirements for a VA loan. However, not everyone knows there are multiple ways to obtain your COE – some easier than others.