Lindsey Schmidt’s clients offered more than the home was worth to them on paper. It was a newer property in great condition, and they bid above what Schmidt expected it to sell for.
But it still sold to someone else — for less than her clients’ offer.
“The seller just didn’t want to deal with the VA loan,” said Schmidt, a licensed agent with Fathom Realty.
Schmidt, an Army veteran who served in Iraq, has built her business around military buyers in Northern Virginia, specifically the special operations community. Losing the aforementioned deal two months ago is a familiar story for her clients — and for her.
Years ago, before she got her real estate license, she had the same experience. Her VA home loan offer, with the same numbers as a conventional buyer, was passed over. She was frustrated at the time, but she kept searching and found a better home anyway, she said.
For Veterans Day, Inman spoke with Schmidt about why VA financing still carries a stigma among sellers and listing agents, how she gets around it, and why VA assumptions remain one of the most misunderstood tools in the market.
The appraisal problem
On paper, the VA loan is one of the strongest products available to buyers. There’s no down payment required, and unlike a conventional loan, there’s no mortgage insurance, ever, even at 0 percent down, Schmidt said.
Lindsey Schmidt
“With a conventional loan, you have to have 20 percent or some point of equity before you stop paying mortgage insurance,” Schmidt told Inman. “But with the VA loan, there’s no mortgage insurance ever, even with 0 percent down. And a lot of times the rates are even better.”
But sellers don’t evaluate offers on the buyer’s monthly payment, and the VA loan’s reputation among sellers has little to do with what the product actually does for the buyer.
Schmidt said the stigma comes down to the appraisal. VA appraisers can flag lender-required repairs, and in Schmidt’s experience, VA is the only loan type where she’s seen it happen.
“I’ve never had it on any of my conventional transactions, but with VA, I have seen it a couple of times,” she said. “It’s usually things like a missing handrail on a staircase or loose railings on a deck, usually safety concerns.”
In one case, the required repair was repainting exterior trim around a garage. Schmidt said she’s only had one VA appraisal come in “super, super low.”
‘They’ve just heard VA is bad’
Schmidt’s read is that most sellers who balk at VA offers aren’t reacting to anything specific.
“They hear that there are nightmares with VA, and most of the time, I don’t think they even know what they’re talking about,” she said. “They’ve just heard VA is bad.”
Listing agents’ concerns are more grounded, she acknowledged, at least for older homes with deferred maintenance. The problem is when that caution gets applied across the board, as it did with the pristine home her clients lost.
There’s a second assumption at work, too: that a buyer using 0 percent down doesn’t have money.
“Sellers want buyers to have some money just in case an appraisal is low or something comes up,” Schmidt said. “People just assume that the veteran does not have money because they’re using a VA loan, but a lot of times, you may have a ton of money in the bank. You just don’t want to have to use it if you don’t have to.”
Turning down a VA offer isn’t a fair housing violation. Sellers are free to decline financing they aren’t comfortable with. Schmidt said she agrees, even if it stings.
“I think that sellers should be able to have the option to turn down financing if they’re not comfortable with it,” she said. “It just stinks for my VA buyers.”
Getting ahead of the objections
Schmidt’s playbook is to get ahead of the objections before the offer lands. She calls the listing agent first to explain why her buyers are using VA financing, that they have reserves and that she has no concerns about the property.
Then she has her lender call the listing agent, too, rather than waiting for the listing side to reach out before ratifying, “just to talk through the process of, ‘Hey, this is how long I expect timelines to last. I’ve done this many VA deals,'” she said. “Just to remove any of those concerns ahead of time.”
It usually works. But not always.
“I overcommunicated, and my lender overcommunicated,” Schmidt said of the deal she lost two months ago. “The seller just didn’t want to deal with it.”
Going all in on special ops
Schmidt didn’t start out with a niche. Early on in her real estate career, she worried that narrowing her focus would cost her business.
“I didn’t want to leave any business out there. I didn’t want to alienate anyone,” she said. “But then after a while, I was just like, these are the people that I want to work with.”
She now markets specifically to the special operations forces (SOF) community, attending military conferences and charity functions.
“I do just as much networking within SOF as I do real estate,” she said. “My business is even better once I narrowed my focus.”
That business has slowed recently. When asked whether it was due to the Iran conflict, Schmidt said yes, but not because her clients are being deployed to the Middle East. She said the real reason was that the housing market has slowed in most places, partly because of elevated mortgage rates and other macro-economic factors.
Schmidt said military clients still face forced moves that civilians don’t, so the buyers who have to transact are moving forward. But clients who had been planning discretionary moves, such as upsizing within the D.C. area, have put those plans on hold, mostly because of rates.
“They’ve just said, ‘You know what, I don’t have to buy or sell right now, so I’m just going to wait a little bit,'” she said.
A low rate comes at a price
The question Schmidt gets most from buyers is about VA assumptions, which let a buyer take over a seller’s existing VA loan and its interest rate. She’s seeing fewer of them than two years ago, and she said listing agents often market them poorly.
“They put the interest rate in the listing description, but don’t tell you the balance,” she said. “The balance is one of the most important parts. If the balance is too low, then it doesn’t make sense.”
A higher balance means the buyer gets more of their financing at the low assumed rate. But assumptions can take months to close, and the seller doesn’t see proceeds until then. Schmidt once had sellers wait four and a half months.
That’s where buyers who get excited about a 2.75 percent rate tend to run into trouble.
“Every single benefit is for the buyer. There is zero upside for the seller,” she said. “So buyers have to give them one.”
In practice, that means incentives like a higher price, a waived inspection or fewer contingencies, the same levers buyers use in any competitive deal. Some buyers bristle at that, Schmidt said, and accuse sellers of being greedy.
“I’m like, they’d say the same thing about you. You just want the lower interest rate,” she said. “Everyone’s trying to get the best deal for themselves.”
