The COVID-19 pandemic had a profound effect on nearly every aspect of modern life and business, including the local real estate market, favoring sellers and creating stiff competition among buyers and renters.

For the past year and a half, there’s been a shortage of homes for sale, particularly in the entry- to mid-market price ranges. Homes that came to market in decent condition sold quickly and for above asking price. Cash buyers came to southeast Connecticut for its coveted coastline.

Homeowners who sold in the past year capitalized on the market, selling fast and typically for well over asking price. But they also faced challenges. Now as buyers, they were on the other side of the negotiating table, looking for a home to purchase or rent, in a highly competitive market with little inventory from which to choose.

That was Stacy Parent’s predicament. A few years ago, she sold a house in Preston. It took a single day on the market to garner multiple offers. Parent hoped to downsize to a new home for herself and two school-aged daughters. Her wish list wasn’t elaborate, nor indulgent. She simply wanted three bedrooms, a garage, and preferably to stay in Preston, so her daughters wouldn’t be uprooted from school and friendships. She preferred a neighborhood setting, where kids make friends and the adults get to know one another.

As a buyer, Parent had a few things working in her favor. She’s employed as a senior ethics and compliance officer at Pratt & Whitney. Plus, she had a mid-market budget -- approximately $250,000 to $600,000 in New London County.

Parent also came to the table with the assurance of a VA loan. She served in the U.S. Air Force for eight years.

Dispelling myths about VA loans

In 1944, the U.S. Congress voted in favor of a mortgage guarantee program administered by the Department of Veterans Affairs. Since that time, the VA has backed more than 25 million VA loans, according to the Congressional Budget Office.

A VA loan is a lifetime benefit afforded to active-duty service members and veterans, ensuring them a fair and favorable mortgage rate and a loan requiring no down payment. The CBO reports that Fiscal Year 2020 was a record year for VA loans — 12% of all single-family home mortgages that year were VA loans.

From a seller’s perspective — especially in a market where they’re choosing the best of multiple offers for their homes — a buyer with a VA loan is a relatively “safe bet.” According to the Department of Veterans Affairs, eight out of 10 VA loans close (if the applicants have applied within the previous 90 days).

The CBO also studied default rates, comparing VA loans to FHA loans in the years 2004, 2010 and 2012 — notably, pre-pandemic. In each of those years, the default rate for VA loans was lower.

However, misconceptions about VA loans abound, among the real estate community and even among service members.

The Navy Federal Credit Union surveyed 1,000 active-duty personnel and veterans for its “Spotlight on VA Loans Report (May 2022),” which revealed many of the respondents were misinformed about how VA loans work, who qualifies, the interest rates applicants are subjected to, or the amount of down payment required.

The survey found that 59% of active duty and 41% of veterans believe VA loans have longer processing times; 58% of active duty and 40% of veterans think VA loans will have delays due to all the paperwork involved.

“One of the myths we have heard from the real estate community is that it takes longer to get a VA loan approved compared to a conventional loan,” according to Jessye Jordan, corporate communications specialist III for Navy Federal Credit Union, based in Vienna, Va. “We don’t see any significant difference in the data. It typically takes about 35 days from contract to closing in either case. There’s also an idea that there’s more paperwork required, but aside from the borrower’s Certificate of Eligibility, the paperwork is basically the same for a VA loan and a conventional mortgage.”

Navigating the market

After selling her home in Preston, Stacy Parent signed on with a Realtor, secured her approval for a VA loan through Flagstar Bank, and began her search. She found a few homes — including one she really wanted — and made some earnest bids, only to lose out to other buyers.

She began to feel “buyer’s fatigue,” brought on by the heartbreak of the cycle — the search, finding a home, bidding on it, and seeing it go to someone else. It’s caused an untold number of buyers to resolve themselves to rent, instead.

Parent found that renting was her best option, too. A friend introduced her to a landlord from whom she rented a house for $1,500 a month — a bargain, she felt, compared to others she’d seen for more than $2,000. As the lease-expiration date neared, she dipped her toes back into the market, engaging a new Realtor, Sara Vegliante, the broker-owner of Sara’s Realty in Preston.

The market was still competitive. Homes were selling for well above list; they were sold in record time, and buyers had to be agile and ready “to make the biggest decision of their life” within hours.

“Cash buyers were coming out of the woodwork,” Parent recalled.

She bid and lost out on four homes before she found one — and the right home, too, which checked off her most important boxes: three bedrooms, a garage, in Preston, part of a neighborhood. The split-level colonial was built in 1974. It’s on a 0.73-acre lot across from Amos Lake.

The property listed for $289,000 on May 5, and Parent purchased it on June 21 for $323,000.

It wasn’t in pristine condition, and that was one concession Parent realized she had to make based on the market conditions. While a move in-ready home would’ve been ideal, those types of properties were fetching prices beyond her budget.

Over time, she’ll contend with repairing leaks and mitigating mold in the garage, which had poor ventilation.

“It is the nature of the market today. You have to settle,” she said.

Like with other offers she’d made on homes, Parent had to come in high with her bid — about $40,000 over asking — and she decided to use a conventional loan rather than the VA loan she’d started out with.

“I think it’s really terrible that we can’t even use that benefit,” she said.

“Some people were forgoing inspections, versus a VA loan, where you’re not going to be able to do that and they’re a little more stringent on appraisals,” she said.

“This house ended up being perfect. It needed work, but the layout itself and the space are what I hoped for, and we’re right across the street from a lake,” she said.

She believes it’s a good investment, too.

“When I bought houses in the past, my grandfather used to always say to me, ‘Location, location, location! Location is key.’ But anybody buying a house today — unless you have a lot of money to put down on it — you’re overpaying,” Parent said. “It’s just the market. But for the location I got, the neighborhood I got, and even though I had to do a lot of work and put money into it, it’s definitely a good investment.”