Can You Buy a Foreclosure With a VA Loan? Appraisal, Repairs and As-Is Sales

The listing for a block ranch in Port Charlotte says the bank is selling it as is. The lawn is mowed, there's a lockbox on the front door, and the photos show clean tile floors and a screened lanai.

That's usually when veteran clients ask me whether a VA loan can buy a foreclosure. It can, and the part to understand is how VA's property rules meet a seller that won't promise repairs.

Can a VA loan buy a bank-owned home?

Yes. VA requires every home it backs, foreclosures included, to meet its minimum property requirements or be repaired to meet them before VA guarantees the loan. Those requirements are about a home being safe, structurally sound and sanitary.

An as-is sale means the bank won't commit to fixing anything. It doesn't change what VA needs. So the real question on a foreclosure is what the appraiser finds and who handles it.

What does a VA appraiser look for on a foreclosure?

The appraiser lists any repairs needed to meet VA's requirements and values the home as if those repairs are done. Cosmetic items and normal wear aren't supposed to be on that list. The result comes back on VA's Notice of Value, which also suggests you get a home inspection.

The utilities don't have to be on for the appraiser, since VA appraisers don't test mechanical systems. Your inspector does need them on, and so does a well water test on a house with a private well. Vacant Maine homes are often winterized, so I ask the listing agent early about getting water and power turned on.

Age matters on a foreclosure too. For a house from before 1978, VA assumes lead-based paint is present, and any paint problems on the house have to be fixed before VA backs the loan. Maine has a lot of older homes, so I watch for that one.

Who pays for repairs on a VA foreclosure purchase?

VA lets the seller and the veteran negotiate who pays for the repairs listed on the Notice of Value. A bank may agree to fix a short list, or it may ask you to cover them. If you pay, I want the seller's written permission for the work in the contract, because the house isn't yours until closing.

Some repairs can be finished after closing, with money held in escrow. VA still requires every repair to be done and the escrow paid out before it guarantees the loan, so not every lender offers this. I check the lender's policy before you make the offer.

There's one more route. After the Notice of Value is issued, you can ask VA to waive a repair if you sign the request, your lender agrees and the home is still habitable and safe. VA may lower the appraised value by what that repair would have added.

Can you use a VA loan at a foreclosure auction?

In Florida, the county clerk runs the sale. The high bidder posts a 5% deposit, and in Lee County the balance is due by 4 p.m. the next business day. The clerk's office also warns that some liens can survive the sale, so a title search comes first.

In Maine, the sale comes after a court judgment and a 90-day redemption period. The lender advertises a public sale for three weeks and sets the terms in that notice. If the lender ends up owning the house, it usually goes on the market as a bank-owned listing.

A VA loan needs an appraisal, a Notice of Value and underwriting, which don't fit a next-day payment deadline. That's why a VA purchase usually happens after the auction, from the bank's listing.

Does VA sell its own foreclosed homes?

Yes. VA takes back some homes when VA-backed loans end in foreclosure, and its property management contractor sells them. Local agents list these homes on the MLS, and VA tells buyers to work with a real estate broker of their choice to see one.

VA has also offered its own seller financing on some of these homes, called Vendee financing, which is open to veterans and non-veterans. It's separate from your VA home loan benefit, so I compare it with a regular VA loan if a VA-owned home is on your list.

What's different about a VA foreclosure in Florida and Maine?

VA asks for wood-destroying insect information on VA purchases anywhere in Florida. On a Florida foreclosure, the termite report goes in the file with the appraisal. Maine isn't on that list, so it comes up only when the appraiser notes a sign of trouble.

As a mortgage broker, I compare VA lenders on how they handle repairs and escrows, because policies vary. Residential home loans in Maine and Florida. DSCR loans in 37 states. My Florida VA loan page and my Maine VA loan guide cover the rest of the program.

FAQ

Can you buy a foreclosure with a VA loan?

Yes, you can buy a foreclosure with a VA loan if the home meets VA's minimum property requirements, or is repaired to meet them before VA guarantees the loan. The VA appraiser lists any required repairs on the appraisal.

Can you buy an as-is house with a VA loan?

You can buy an as-is house with a VA loan, but an as-is sale doesn't change VA's property rules. Repairs the VA appraiser lists still have to be finished, paid for by the seller or by you, before VA guarantees the loan.

Who pays for repairs on a VA loan foreclosure?

On a VA loan for a foreclosure, VA lets the seller and the veteran negotiate who pays for required repairs. The repairs have to be completed before VA guarantees the loan, even if some money is held in escrow at closing.

Can I use a VA loan at a foreclosure auction in Florida?

A VA loan usually doesn't fit a Florida foreclosure auction, because the high bidder posts a 5% deposit at the sale and pays the balance on a short deadline. In Lee County that's 4 p.m. the next business day, and a VA appraisal and underwriting take longer than that.

Can a veteran waive VA appraisal repairs?

Yes, after the Notice of Value is issued, a veteran can ask VA to waive required repairs on a VA loan. The lender has to agree, and the home has to remain habitable and safe.

Does a VA loan need a termite inspection in Florida?

Yes, VA requires wood-destroying insect information on every VA loan purchase in Florida, foreclosure or not. In Maine, VA asks for it only when the appraiser notes a possible problem.

---

Picture that Port Charlotte ranch with the lockbox gone, the repairs signed off and your own key on the ring. Found a foreclosure you like? Send me the listing link and your Certificate of Eligibility to travis@travis.mortgage or through my contact page. I'll go over what the VA appraiser is likely to flag and how I'd write the repair terms into your offer.

Started in 2004 and I'm still here.