HELP FOR MILITARY HOME OWNERS WHO MUST SELL WITH NEGATIVE EQUITY.

By
Real Estate Agent with Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate 303829;0225082372

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:Military Buyers

  • 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. 

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988, E-mail.

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Re-Blogged 15 times:

Re-Blogged By Re-Blogged At
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Topic:
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Rainmaker
652,773
Bob & Carolin Benjamin
Benjamin Realty LLC - Gold Canyon, AZ
East Phoenix Arizona Homes

Interesting -- likely we will see more of these as this market keeps moving. Thanks for the info. All the best.

Jan 01, 2009 08:21 PM #44
Anonymous
Anonymous
Thea Agnew

Thank you so much for this information.  I believe I have a couple that we need to look into this. I will check around.  Thanks again!

Jan 01, 2009 08:32 PM #45
Rainmaker
198,934
Emily Lowe
The Lipman Group Sotheby's International Realty - Nashville, TN
Nashville TN Realtor

Lenn - Every time you post I learn something - you are such a wealth of information!!!  Thanks again for sharing this information.  I wish you a very happy and healthy 2009!

Jan 01, 2009 08:48 PM #46
Rainmaker
591,134
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

Lenn,

You provided great information for military and military area REALTORS. Well done.

It's not going to make everyone happy, those that feel entitled to the lender's money won't like it, but for realest it's an honorable solution to a terrible problem.

Bill

Jan 01, 2009 09:02 PM #47
Rainer
29,727
Sondra TenClay
Grand Rapids MI Coldwell Banker AJS-Schmidt - Grand Rapids, MI

Thanks for the info.  I hadn't heard about this program so the info will useful in the future...also for my daughter who serves with the USAF.

Jan 01, 2009 09:11 PM #48
Rainer
339,851
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

I thought I knew quite a bit about VA mortgages and such, but I had no idea this help existed for military families.  Lenn, thank you!

Jan 02, 2009 04:04 AM #49
Ambassador
2,426,459
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Charles Stallion wrote:

Wow and I thought the bail out was something new and you say this has been going on for years. Now I am one in complete support of our military but isn't this the same as bailing out the insurance, mortgage and auto industries.

Charles.  What, may I ask, did the insurance, mortgage and auto industries do to EARN the right to a hand-out from the American tax payer?  The VA home buyer has EARNED the VA Loan benefit by putting their lives at risk to protect our country. 

Further, unlike the HAND-OUTS to the insurance, mortgage and auto industries, the VA Loan owner must sign a note with specific interest rate and pay back terms to use the VA Compromise loan and their VA benefits are suspended until the money is repayed.  How can you compare either the recipient of these benefits or the terms and conditions of the benefits??????

Charles wrote:  I have never been an advocate of military folks purchasing homes knowing that they will be transferred in 3 years or less. A lot of my friends and family are military (active and retired) but they sell their home or rent them. I don't remember any of them getting something like what you are talking about.

I have never been an advocate of ACTIVE DUTY military folks purchasing homes while on a short assignment either.  I advise them to rent.  However, over the years, since about 1985 until about 2004, most military buyers could easily break even or have positive equity in my market place after 3 years.  For the years 1094 to 2003, our market had an average annual appreciation of about 3.5%.  The VA buyer needs about 6% positive equity to sell and not have to pay out of pocket.  What is that 6%?  It's the real estate commission and seller cost for transfer fees, which in our area are confiscatory taxes by local governments. 

Further, the VA Compromise loan is available to ANY home owner who has VA benefits.  They may have served our country at any time in the past, 5 -10 -20 years ago and have VA benefits.  What I'm reading in your comment is that you appear to be AGAINST the VA Loan. 

If you believe that the VA Compromise Loan is in any way comparable to the government bail-out/hand-out to the Wall Street cronies of Paulson, think again.  The Wall Street gangs that got the bail-out money CAUSED the housing meltdown.  The VA Compromise Loan benefit for VA borrowers was EARNED.

 

Jan 02, 2009 05:23 AM #50
Ambassador
2,426,459
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Sara.  Keep reading ActiveRain.  There will be a few nuggets of helpful info daily.

Rose.  Few agents are aware of this program. 

Robin.  Few agents or home owners know of this program.  I discovered it many years ago (pre Internet) when I had a listing of a house in MD financed with a VA loan where the owner, then civilian, was transferred by his employer to Texas.  I simply visited the local VA office to see if there was something available for my seller and they told me all about it.  I've used it over the years several times.  It's a more valuable tool for listing agents because they are the ones who discover the condition of the VA financed owner. 

Lisa.  HA!  One would, wouldn't one?

Fred.  Good for you. 

Tim and Pam.  My pleasure. 

 

 

 

Jan 02, 2009 05:32 AM #51
Ambassador
2,426,459
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Liz.  They have transferred, so have been at wits end trying to figure out what to do. Do you happen to know if there is a dual loan - backed by another entity (in their case Maine State Housing) if both have to agree to this?

I don't really understand your question.  The VA Compromise Loan is between the VA borrower and the Veterans Admin.

Bob and Carolin.  Not if this post is any indication of the awareness of the program. 

Thea.  Have your owner make inquiries with the VA.

Emily.  Thanks.  I'm a research junkie.

William.  Indeed.  In my experience, every VA owner that has used this program stands behind their promise to repay.  This program is not a hand-out, it is a loan.  If the military borrower or veteran borrower does not repay, their VA benefits are suspended.  This is a most honorable program.

Sondra.  Glad to spread the word.  Thank your daughter for her service to all of us.  Hopefully, she'll not need this particular VA program, but she's earned it.

Kris.  My pleasure. 

 

 

Jan 02, 2009 05:39 AM #52
Rainer
9,113
Jon Graham
Keller Williams Realty Central Delaware - Dover Air Force Base, DE
CRS, ABR
Lenn, Ironic that I Asked the question and I'm as many blogs behind as there are weeks in the year! Thank you so much for this information. I will attempt to contact the VA today and even give my client a call of hope! YOU ROCK LENN!
Jan 02, 2009 06:36 AM #53
Ambassador
2,426,459
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Jon.  But, I just read your post and you commented that the loan is not a VA loan.  But, just keep digging.  There may be something there for this soldier.

 

Jan 02, 2009 06:37 AM #54
Rainmaker
1,090,561
Bryant Tutas
Bryant Tutas-Tutas Towne Realty, Inc - Poinciana, FL
Broker/REALTOR, Tutas Towne Realty, Inc

Len here's a little additional information about military home owners. First their credit histories will affect their careers. Foreclosures can cost them their ability to achieve a higher rank. This program exists because of a long lost thing called "honor". It's their code. Taking advantage of this program has nothing to do with a "bail out". It;s the VA standing behind their military and paying their obligations for them if necessary with the promise that the seller will pay them back over a period of time. It's the honorable thing ti do and more folks ought to do it. In the civilian world folks just balk at paying the promissory note. 

Very good post Lenn.

Jan 02, 2009 06:43 AM #55
Ambassador
2,426,459
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Thanks Bryant.  I couldn't have stated it better.  Indeed, the military owner signs a note to the VA for this benefit. 

Something I learned a number of years ago was that military or civilian personnel with security clearances may lose their clearance if they are foreclosed or have negative info on their credit report.  HOWEVER, the employers, NSA, military, pentagon, etc, are more forgiving if the employee files a bankruptcy petition.  The see less risk for an employee who has liquidated debt than one who still owes a lot of money and is in financial distress. 

TOTOH, the government passed laws that give relief to non-VA financed short sale and foreclosure owners to help them with the deficiencies. 

Jan 02, 2009 07:02 AM #56
Rainmaker
591,134
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

"Good Morning Lenn,

"This is a most honorable program."

In deed that's what I though I said!

Bill

Jan 02, 2009 08:20 AM #57
Rainmaker
222,031
Mark Watterson
Salt Lake City, UT
Utah Real Estate

You make excellent points in your post and comments.  I couldn't agree more.  My favorite comment part was by Bryant....."It's the honorable thing ti do and more folks ought to do it. In the civilian world folks just balk at paying the promissory note." 

So much truth.  What a great statement.  What happened to the old civilian values of avoiding debt, paying your debts, don't accept handouts from the government and your word is your bond?  Was it just a dream I had while growing up?  If the all civilians embraced these values would be going through these tough times?  I really doubt it.  Is going to happen?  Now, I'm really dreaming......

Jan 02, 2009 08:50 AM #58
Rainmaker
276,669
Alan Gross
PrimeLending, A PlainsCapital Company - Bethesda, MD

Great information. I've wasn't aware the program existed. This would be a good thing to market to potential VA sellers who probably don't know this option exists.

Jan 02, 2009 11:07 AM #59
Rainer
25,792
Kathy Batterton
RE/MAX Infinity CDPE, E-PRO, GRI - Pace, FL

Wow!  I thought this was only available in a downsizing by the local military bases.  WOW, again!  We really need to be telling our local troops about this one....sadly, our military members were hurt most by the local real estate market here.

Jan 02, 2009 08:16 PM #60
Rainmaker
1,306,008
Carla Muss-Jacobs, Principal Broker/Owner
BuyersAgentPortland.com | (503) 810-7192 Portland Metro Exclusive Buyers Agent | 100% Buyer Representation ~ 100% o... - Portland, OR
Buyer Focused ~ Buyer Results

Does Active Rain "RE-FEATURE" blogs??  Because this would be a GREAT BLOG to re-feature!

Sep 24, 2009 03:54 PM #61
Ambassador
909,783
Margaret Woda
Long & Foster Real Estate, Inc. - Crofton, MD
Maryland Real Estate & Military Relocation

It's been years since I've done one of these, and I'm surprised I haven't come across any in the past year.  It is probably the most painless short sale you'll ever do!

May 18, 2010 06:44 AM #62
Ambassador
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Margaret.  I agree.  Sadly, this is a case of the owner not understanding what their options and benefits are and the average agent not having ANY knowledge of VA housing benefits. 

May 18, 2010 08:06 AM #63
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