THE VETERANS ADMINISTRATION COMPROMISE SALE.
Jon Graham asks about relief for the military home owner who finds himself or herself in a negative equity situation and needs to sell.
The VA Compromise Sale is often the solution. I've done several over the years and they are very much preferred over the conventional short sale or foreclosure. Military owners do not usually have a choice when they receive orders to transfer. Yet, if they purchased a home in the past several years, there is a good chance that they do not have sufficient equity to pay the cost of sale, part of which is usually a real estate commission. Yes, agents do expect to be paid when handling the sale of any property.
WHAT THE VETERANS ADMINISTRATION DOES FOR THE MILITARY BUYER ALSO APPLIES TO FORMER MILITARY HOME OWNERS WITH A VA LOAN.
If the Veterans Administrations accepts the hardship application from the VA financed home owner, they will pay:
- 1. The mortgage deficiency.
- 2. The real estate commission.
- 3. Closing help negotiated in the Contract of Sale.
The VA borrower signs a note to the Veterans Administration at a significantly reduced interest rate and has a period of time to pay. The last VA Compromise I managed, the note to the Veterans Administration had a 4% interest rate and a term of 10 years.
What the VA Compromise Sale does is permit the VA financed seller to price the property to sell.
From the VA Web site.
Q: How does a VA compromise claim payment work?
A: When a veteran attempts to sell his or her home and the expected proceeds from the sale are not enough to pay off the existing loan, and the veteran has no other source of funds to complete the transaction, a VA compromise claim pays the difference. As with any claim payment by VA, the veteran usually remains liable to VA for the amount of the claim payment. However, the compromise claim is usually less than the claim which would have been payable if the sale had fallen through, the veteran had failed to make the loan payments, and the lender had foreclosed on the loan.
Agents with VA financed home owners should check with the local VA field office for the latest terms and conditions that are applicable to the VA Compromise Loan.
WARNING: If an agent negotiates a successful Compromise Sale, check around for title companies that have the knowledge to do them. They can't just wait for the last minute as so many title companies do. It doesn't happen that quickly because VA has to approve the HUD-1.