VA Short Sale Information
There are many reasons why a military member would want to sell a home in today’s distressed housing market. A military relocation is one reason some are motivated to sell, another is change in marital status requiring the sale of the home. Whatever the reason, if you purchased a home using a VA loan when the market was strong, you might not have anticipated selling the home under today’s conditions. Depending on the housing market in your area you could wind up taking a loss on the sale of the home you purchased with a VA loan.
Fortunately, some VA mortgage holders have an alternative called a VA Compromise Sale. If you are approved for a compromise sale, the VA steps in to pay the difference between the offer and the amount which remains due on the VA mortgage. Compromise sales are provided to help VA loan holders in financial distress and to reduce the number of foreclosures. They are typically one of the easier transactions when comparing them to other types of short sales. Once you list your home for sale and receive an offer based on current market value, but lower than the total amount of the loan payoff, your REALTOR® (with your authorization) can ask VA to approve a compromise sale for you.
The main requirement to undertake a compromise sale is that the veteran is experiencing severe financial hardship that prohibits them from meeting their mortgage obligation. Suitable hardships include:
- Major medical expenses
- A decrease in income
- Death of one of the principle wage earners in the household
- Involuntary relocation
If the veteran has any significant assets, the VA may require that they be sold or cashed in to help offset the mortgage deficiency.
The VA will review the veteran’s situation, looking for the following criteria:
- The home must be sold for current market value.
- Closing costs must be “reasonable and customary.”
- The compromise sale will be less costly for the VA than foreclosure.
- The veteran’s financial situation.
- The date of mortgage origination – if the loan was taken out on or before December 31, 1989, the lender must agree to write off the portion of the debt above the maximum guarantee.
- The home has no other liens.
Please note that you may be required to pay the compromise claim off in the future if you want to use your VA Certificate again, otherwise you will have to utilize other loan programs such as FHA or conventional financing on future purchase.
A financial hardship can affect any household, in any price range. There are a number of things that can happen that are simply beyond your control. If you are considering a short sale, or if you are facing foreclosure, take the time to look into this program. It may not be a particularly pleasant process, but it beats a foreclosure which can have negative ramifications for years to come.
Through my experience handling distressed properties, I have found that homeowners today have more questions than answers about their circumstances. As an agent with a CDPE Designation, I have a strong and unique appreciation of the factors affecting the market and know there are options available to you. If you could benefit from a confidential consultation regarding the solutions available or simply have questions, please do not hesitate to contact me.
Bob Chance, Associate Broker
William E. Wood and Associates
222 Mustang Trail
Virginia Beach, VA 23452
757-672-2089 or 757-486-21410
EHO/Licensed in Va.
The above brokerage assumes no responsibility nor guarantees the accuracy of this information and is not engaged in the practice of law nor gives legal advice. The content is intended to provide general information and should not be acted upon without the counsel of a qualified REALTOR®, attorney and tax expert.