Father and daughter hugging in va foreclosure home

Buying A VA Foreclosure: A Complete Guide To Purchasing A VA Foreclosed Home

Scott Steinberg5-minute read

October 24, 2021

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Thinking of buying a VA foreclosure as a way to purchase a home at a discount, or add to your investment portfolio? You’re in good company, with thousands of home buyers and real estate investors also pondering this same move every year.

As with the purchase of any home foreclosure, it’s often possible to pick up a VA property that’s been foreclosed upon at a fraction of the price of first-run retail real estate. But at the same time, as buying VA foreclosures can also take a bit of effort and upkeep above and beyond normal real estate holdings, there are numerous factors to consider before putting in your application.

You’ll learn what it takes to buy a VA foreclosure (and what you’ll need to know as you go through the process of maintaining and potentially rehabbing one) here.

What Is A VA Foreclosure?

Even homes purchased with VA home loans, which come with lower credit score and down payment requirements attached as a way to help borrowers, are subject to foreclosure if the owner defaults on their mortgage. These foreclosed properties are colloquially referred to as VA REO homes, or Veterans Affairs real estate owned homes. In effect, in the event of a default on the mortgage loan by a property owner, these homes are repossessed by the Department of Veterans Affairs (VA) if they aren’t sold at an auction or a short sale.

Who Can Buy VA Foreclosures?

For practical intents and purposes, anyone can purchase a VA repossessed home. Homes acquired by the VA through foreclosures on VA loans are open for acquisition by any prospective home buyer through real estate professionals. In other words, these homes are available for anybody to buy and add to their real estate portfolio, regardless of their actual status as a military service member or veteran. Better yet for those hoping to acquire new homes at a fraction of their initial asking price, real estate investors also enjoy the option to purchase VA foreclosures. Adding these properties to your holdings at a discount offers the opportunity to enjoy considerable potential profit at a future date when you elect to sell.

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Steps To Buying A VA Foreclosure

Looking to pick up a VA foreclosure for purposes of renovation and residence, or to add it to your financial holdings as a potential real estate investment? A few steps will be involved in the process of making the acquisition – a process which can be similar in nature to buying a foreclosed home that isn’t a VA REO.

1. Work With A Real Estate Agent 

Few professionals know the specific ins and outs of a property market, and what a great opportunity or bargain looks like, like a local REALTOR®. Noting this, you’ll want to work with a trusted real estate agent, who can help you identify and hone in on properties to purchase, as well as keep you up to date on trends in the area. As part of their support and services, your real estate agent can help you find VA foreclosures using the multiple listing service (MLS).

2. Look For Veterans Affairs REO Homes

On the hunt for a value-priced foreclosure? As it turns out, other than at an auction or short sale, VA REO homes can be found through an agent or broker. Be advised that all VA REO homes will be sold as-is – in other words, what you see is what you get, and will be placed for sale in its current condition, for better or worse.

3. Get A Mortgage Preapproval

As with any home purchase, getting preapproved for a mortgage can improve your chances of purchasing a foreclosed home. It offers the VA a degree of confidence that you are a serious buyer and will have the necessary funding required to make the purchase.

4. Have An Appraisal And Inspection Done

Of course, as with any real estate you’re considering acquiring, you also have to do a bit of legwork. For example: Your lender may still require you to have an appraisal done on the home, and conducting an inspection would also be a good idea given that properties can be sold in any condition.

5. Close On Your New Home

The last step is to close on the home, pay any closing costs, and ensure that all paperwork and research has been done to ensure a proper transfer of ownership and title. You’ll close at a preset date and time, at which any remaining balances must be paid and loan conditions filled, with the help of various real estate professionals.

Can You Buy A VA Foreclosure With A VA Loan?

If you are an eligible servicemember, veteran or surviving spouse, you can buy a VA REO home using a VA loan. In fact, there are many benefits to doing so. For example:

  • You may use the VA IRRRL to refinance to a lower rate.

Pros And Cons To Buying VA Foreclosed Homes?

Of course, as with any real estate investment, there are also advantages and disadvantages to be recognized by buying a VA foreclosure. You’ll wish to consider the following upsides and drawbacks as you consider whether to add a VA foreclosed home to your real estate portfolio.

Pros

  • VA foreclosures are available to veterans, service members, and civilians alike.
  • You can purchase a VA foreclosure at a lower price than other homes in the area.
  • Home rehabbers and DIYers enjoy ample opportunity to remodel VA foreclosures.

Cons

  • Homes sold as-is could come with maintenance problems attached.
  • You may have to evict squatters who take up residence in a foreclosed home.
  • Additional hidden costs and expenses may be attached to home renovations.

The Bottom Line: VA Foreclosures May Be Right For You

A VA foreclosure or VA REO effectively presents an opportunity through which anyone – real estate buyer or investor – can pick up a property at a fraction of typical costs. At the same time, these properties are sold in as-is condition, and may need varying amounts of work and tender loving care.

As when buying any form of foreclosed property, it helps to have a team of trusted real estate professionals on your side who can provide advice and feedback. Likewise, you’ll want to take time up-front before putting in an offer to extensively research properties, neighborhoods, and local real estate markets.

On the upside, buying a VA foreclosure can be a great way to acquire a new residence or investment property. What’s more, it also presents added opportunity to reshape, remake, and upgrade properties in your own preferred image. But VA properties may also require you to put in additional effort and maintenance as you work to transform and turn them around.

Interested in getting started with buying VA foreclosures? You’ve come to the right place! Those looking to begin the mortgage lending process can apply today with Rocket Mortgage®.

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Scott Steinberg

Hailed as The Master of Innovation by Fortune magazine, and World’s Leading Business Strategist, award-winning professional speaker Scott Steinberg is among today’s best-known trends experts and futurists. A strategic adviser to four-star generals and a who’s-who of Fortune 500s, he’s the bestselling author of 14 books including Make Change Work for You and FAST >> FORWARD. The CEO of BIZDEV: The Intl. Association for Business Development and Strategic Planning™, his website is www.AKeynoteSpeaker.com.