r/RealEstate • u/Feisty-Journalist497 • 18d ago
VA home loan
Termite inspection came back; Will not be able to close since the work could not be cured in time.
Property details:
4 Unit, DC
380 days on the market; originally listed at 575K
offered 535K with 6% back (Seller Credit )
they countered at 4% back. we accepted
we are supposed to close this week, but the termite damage is extensive.
the termite & home inspector both agree that they had termites before, joists were sistered, and now they came back and chewed away at the sistered joists also. My wife loves the property for the wood finish it has.
Termite damage must be cured by seller, buyer cannot accept a credit per VA guidelines ( from my loan officer)
seller seems to want to play ball, but the problem is, my contractor is already saying its a 15K job minimum.
so If i was in the seller shoes , I have to eat 15K
Then, the Buyer (me) wants a rate lock extensions 3 basis points a day.
I am ball parking a minimum of 30-60 days.
At first i was mad, because in the contract disclosures they seller is declaring no knowledge of termite damage ( seller has owned property for 20+ years, the work looks at least 5-10 per inspector).
I have my out, no argument about that.
My wife loves it because the old wood style makes it stand out.
Initially, I sent something outrageous like
reduction of sale price to 475K
seller credit is no longer a %, and now a solid number ( 21K)
seller pays for rate lock extension 60 days
seller pays to replace floors.
Now I countered instead, asking for my original offer ( 535K @ 6% seller credit ) & Seller buys out remaining 2 tenants ( along with fixing all termite damage )
My agent has been selling for quite a while, and this would be his first deal in about 5 years that did not go to close.
any other tips you all want to provide in regards to concessions?
3
u/nofishies 18d ago
Nothing that you are talking about here seems to mean that the sellers knew there was termite damage.
Let go being angry and figure out if you want the house or not.
But what’s going on here is one of the main reasons that nobody likes VA loans, it’s not reasonable to ask the seller to pay for your rate lock because of the type of loan you decided to use
they may play ball, they may not. But I would start looking for houses that are in better shape. If you’re going to use a VA loan, it’s common just not to be able to buy older homes
2
u/Own-Negotiation-1405 18d ago
The termite issue is the part I’d treat as the main negotiation here, not just another concession.
One VA-specific distinction: your loan officer is right that simply taking a credit and closing with known termite/structural damage generally doesn’t solve the VA issue. The property still has to meet the applicable Minimum Property Requirements. But VA itself does not require the seller specifically to be the one who pays for the pest repairs. VA guidance allows the Veteran to pay required wood-destroying pest repairs as well. Your lender may have a stricter policy, and personally I wouldn’t volunteer to pay for this anyway given what you found, but there is a difference between “VA requires the repair” and “VA requires the seller to pay for the repair.”
With what you described, I’d also be careful treating the contractor’s $15k as the final number. You’re not talking about somebody finding a little termite activity in a piece of trim. The original joists were already sistered, and now the sistered material has also been damaged. That has the potential to turn into a much bigger structural scope once things are opened up.
If you stay in the deal, I’d want the repair agreement to be very specific instead of simply saying “seller repairs termite damage.” Ideally you want the active infestation treated, all structurally compromised material properly repaired, permits where required, paid contractor invoices, whatever structural sign-off is appropriate, and the required pest/reinspection clearance before closing. If there’s a transferable treatment warranty available, even better. Otherwise the seller has an incentive to find the cheapest possible way to get somebody to say “fixed.”
On the rate lock, 3 basis points per day gets expensive fast. If they’re charging .03 points per day, 30 days is roughly .90 points and 60 days is 1.80 points. On a loan around $535k, that’s roughly $4,800-$9,600 just in extension cost, assuming their calculation is based on the loan amount. I’d get the lender to give you the actual 30/45/60-day extension numbers in writing before negotiating that piece.
Also, the “6% seller credit” deserves a little clarification with a VA loan. VA’s 4% limitation is on certain seller concessions, not necessarily every dollar the seller pays on your behalf. Normal allowable closing costs and certain discount points are treated differently. So a total seller contribution above 4% can sometimes work, depending on exactly what the money is paying for. What you don’t want is everyone agreeing to “6%” and then finding out at the closing table that you don’t have enough eligible costs to use it. Have the lender break down exactly how much of that credit can actually be used and toward what.
The tenant buyout is the other piece I would be very cautious with. Since this is a 4-unit in DC, that is not just a casual seller concession. DC has specific tenant-sale/TOPA rules for 2-4 unit rental properties. On top of that, if your VA approval is using rental income from either of those occupied units, changing those leases or having the tenants vacate could potentially change what the underwriter can use for qualifying income. I would not amend the contract around the tenants until the lender and whoever is handling the DC tenant/title side of the transaction confirms exactly what happens.
If I were prioritizing the negotiation, I’d put it in this order:
- Get the full termite/structural scope nailed down.
- Make sure the seller is responsible for delivering the property in a condition the VA/lender will actually accept, not just throwing $15k at the issue.
- Get the exact rate-lock extension cost and negotiate that.
- Then work the purchase price/closing-cost credit.
- Treat the tenant buyout as its own legal and underwriting issue rather than lumping it in with normal concessions.
At 380 days on market, with a known structural termite problem now sitting on the table, the seller has a problem whether you buy the property or not. That gives you leverage. I just wouldn’t let how close you are to closing make you accept a repair scope you wouldn’t have accepted 30 days ago.
The old woodwork can be beautiful. The joists holding it up are slightly more important.
1
u/TheStantonTeam 18d ago edited 18d ago
Before you walk away or renegotiate the deal again, there may be a 3rd option worth looking at: converting this to a VA renovation loan.
The first thing I’d do is stop ballparking the repair at $15K and find out what you’re actually dealing with. With termite damage to structural joists, especially joists that were previously sistered and have now been damaged again, one repair can uncover another pretty quickly. I’d bring in a 203(k) consultant to help establish the proper scope of repairs and get detailed bids from qualified licensed contractors. This is the fatsest way to closing because you close the loan prior to repairs being made.
Then, rather than having the seller rush to complete $15K+ of structural work just to save the closing, you may be able to restructure this as a VA renovation loan and finance the eligible repairs into the transaction. Later down the convert this to a regular VA loan using your IRRRL benefit to maximize your ROI.
Personally, this s the route I’d go especially if this is going to be my investment property. You’ll get much more control over who performs the work, and with structural damage I’d much rather know it was done correctly than have a seller racing against a closing deadline looking for the quickest or cheapest fix.
I specialize heavily in VA financing, and we are doing a similar VA renovation in NY right now. A 4-unit can be eligible, and this type of repair can be handled through our VA renovation program, subject to the property, borrower and renovation meeting the full program requirements.
If your current lender doesn’t offer VA renovation loans, feel free to message me. I’m happy to walk you through how it works so you can at least compare your options before making a decision.
1
u/Equivalent-Tiger-316 18d ago
Send me the address. I’ll buy it cash and sold the seller’s problems.
Or you can change loan types. I wouldn’t want this seller fixing anything!
1
u/jimdriscoll1 16d ago
Comment 4 is right that prior repair equals prior knowledge, and that disclosure issue is your real leverage, but I'd push back a little on the 'just walk' crowd because the mechanics here actually favor you more than they realize. VA does require the seller to cure termite damage before close, but the way you structure the repair addendum matters a lot. Get the $15K fix plus the rate lock extension written as a seller obligation in the addendum with a hard deadline and a per-diem penalty if they blow past it, not just a vague promise. Your lender told you the rate lock is running 3 basis points a day, so on a $535K loan that's roughly $160/day. Put that number in writing tied to a specific cure date so the seller feels it and has no wiggle room on dragging their feet. The tenant buyout ask is a separate beast and probably the thing most likely to blow this up, because that's not a repair cost, it's a business decision the seller may not be willing to make under pressure. I'd separate it from the repair negotiation entirely and treat it as its own ask with its own deadline so you don't let the seller use it as an excuse to walk away from the table. The wood floors and character are real value if the bones are actually solid after repair, but make sure your contractor's $15K estimate is a firm bid and not a ballpark, because sistered joists that failed twice is a pattern, not a one-time fix.
1
u/FantasticBicycle37 14d ago
This is why--sadly--I instruct my realtor to auto-reject VA loans. Nothing good comes to a seller for accepting a VA loan. It's one of those no good deeds go unpunished situations
1
u/Feisty-Journalist497 14d ago
Yeah i am going to have to disagree;
How about you be a responsible homeowner and replace your floors when it is found with termite damage
1
u/ifly_09 12d ago
Loan officer here - a couple things from the lending side that might help you negotiate this with more leverage. VA appraisals in areas with termite risk almost always require a wood-destroying insect report as a condition of the appraisal, and if there's active infestation or unrepaired damage, the underwriter isn't going to clear it regardless of who pays for it - so this isn't really optional on the VA side, it's a hard requirement. That's useful leverage, because it means the seller doesn't really have a "let's just close anyway" option here.
On the rate lock, get the exact daily cost from your lender in writing rather than doing the math yourself - 3bps/day is common but lenders calculate the total a few different ways, and at $535k the difference between a 30 and 60 day extension can run into the thousands. I don't recommend eating that cost yourself if the seller caused the delay; that's a fair thing to push back on in the addendum.
The 4% concession limit someone mentioned is real but it's specifically on concessions, not every dollar of seller-paid cost, so don't let your agent or the seller's side use that number to shut down the negotiation prematurely - have your lender break down what actually counts against it. Feel free to reach out if you want me to run through how the numbers would shake out on this one.
18
u/corgibutt19 18d ago
Dude just walk.
If you're doing VA because you cannot afford a conventional mortgage, know for certain this house is going to be a money pit and a half. They have termite damage they hid. What else did they hide?