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.
Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988, E-mail.
Thank you for sharing this information. I did not know it even existed. In the Atlanta area there are very few VA loans done in my area. I would guess over all the deals that we have closed in Atlanta since 1992 maybe only 2 deals were VA. I know in the DC area, MD & VA years ago they were very common. I am glad to hear there is a solution. As usual... you have the answer. Happy New Year.
Lenn, It is nice to know there is at least one agency in our government that can get something right.
Good information. Another positive for the old fashioned VA home loan program.
I wasn't aware of this. But that is probably because we don't have many vets in our area. 40 miles away there are lots of them at our Jacksonville Air Force Base.
Lenn, thanks for pointing out this "solution" when a negative equity situation pops up with a quick move by our military personnel.
Lenn, Thanks for this information. I am another one who did not know anything about this VA program. This is good information to know.
Wow! my second day with active rain and I've learned somethine helpfull. I am in a very strong VA Market in Charleston SC and in fact have always been considered kind of a guru in knowledge on Va financing. Even when the Navy bass closed here and the resale market was tough the government only bought back the home of those that had to transfer but we were never made aware of the program you speak of that could have helped some of the others that had to sell for various reasons. You can bet I'll arm myself and my colleagues with this information and retrieve the program data from VA. Thanks for sharing.
Thanks Lenn that is great information my first lesson in 2009.
Lenn thanks for the info. Good to know. First I've heard of this.
Lenn, thank you for pointing out this information. We don't deal often with military moves, but there are a lot of veteran's using the VA loan in our community, this is great to know!
Thanks for the info; I have not run into this situation and did not know the VA would do this. One more great reason to be a "Fan of Lenn."
I had never heard of this I'm sure Ill run into a situation I can use this in the months to come Thanks for the information and have a Happy New Year.
Hi, Lenn - I have bookmarked this one (like many of your blogs, by the way!). We have a lot of US Coast Guard families here that use VA, and I've been wondering what I do in this case. The two that are listed now seem to have adequate equity, but there are a few out there I hope don't get orders for a few years.
Lenn,
Thanks! I'll bet not many knew about this VA incentive!!! Thanks, Fran
Lenn - Thanks for walking us through this issue. I haven't faced it but I know that there are many who live and work near military bases that will find this helpful. I have passed the link to our friends in the military.
Lenn this is good stuff. First I've heard of this. I've book marked this. Hope I don't need it but I know where to find it if I do.
Lenn,
I've bookmarked this article. I've never heard of this program and feel like I've learned something new and valuable for my clients.
Thanks.
Sandy
I love the VA site...gives info that gets anyone started for home loans etc. They also have all the locations and all who deal with VA transactions should get familiar with their local rep and office. Great info Lenn...I have yet to do a short sale (seller side) and need to learn more.
Lenn - This is great info. I also didn't know this. And, now I am wondering why similar goverment programs have not been implimented to allow those facing foeclosure or shortsale the same benefit at least for the short term period of our housing market crisis. A loan at a significantly reduced interest rate with a period of time to pay would help many distressed homeowners right now. It would be like when GM offers the occasional promotion of an "employee discount to the public". Now this could be just the "bail-out" Main Street needs!
The VA loan is a product that a lot of realtors I don't feel fully understand. This was a very informative post and I enjoyed it.
Lenn - this is such valuble information! We have Fort Campbell just 30 miles from here and I am sure this comes up a lot. Did I understand you correctly that it's only for VA loans? I have discourage these in the past because of all the fees involved. It seems like they're always upside down.
Happy New Year!
I used the VA Compromise to help homesellers several years ago. In one case, the buyer was facing a financial crisis, possibly even foreclosure. In another, the seller was commuting 100 miles a day because their house wouldn't sell under three previous real estate agents. It was relatively simple for the seller and for me, with no impact on the buyer. Definately the way to go for anyone with a VA loan that is higher than today's value.
Lenn, well at least it sounds good, for the Veteran. I am going to email this out to a family I know in the military that is renting due to their home not being able to sell for what is owed. I'll probably re-blog in a couple of days to get the word out.
Lenn,
Thanks so much for this information. This is going to be great information for my clients at McGuire AFB.
Happy New Year
Make This Your Best Year Ever
Leander
Lenn thanks for this post and info. Ive done work with Veterans being one myself. Good to see that the VA is also stepping in to help their Veterans who have VA home loans to stop their foreclosure. Lenn with your permission may I add this VA website to my personal real estate website Blog to inform as many Veterans as I can about this program? thank you
I knew about the option but haven't talked to anyone who has taken the VA up on it. Wonder how this affects their credit rating vs a short sale? Any idea?
Great information Lenn, I've never used one of these as we don't do many VA loans here but am anticipating more in the future, so this info will come in handy. Thanks again! :)
Lenn, I did not know how the process worked thanks. We have only done a couple VA loans lately, I'm told the funding fee gets larger every time you use it.
Lenn: Great information here on the VA Compromise sale. This is a great opportunity for many home owners in a Military community.
Stephen. Of course. Give them all the info you can. I often wonder why this benefit isn't more well known. It works for active duty military and former military with VA loans.
Roland. Indeed and it looks like you're in a military community.
Ricki. I'm surprised considering all of the military bases and former military that live in Texas.
Cindy. This isn't a lender short sale. The lender is paid fully.
Stephen. VA has stepped up to the plate a few times in the past year.
Leander. Thanks and take care of those VA buyers.
Missy. Sure. There's more info on the VA web site. I did about 6 of these sales back in the early 1990s in the previous "down market". I did one a couple of years ago. They work.
Margaret. Thanks for the reinforement. You are absolutely right. It's relatively painless. Of course, the seller has to sign a note for the deficiency, but it beats foreclosure. I found the VA staff extremely friendly and helpful.
Oooh. I forgot something. I should add to the post something about title companies. I'll do that now.
Connie. There is absolutely no reason to discourage a VA loan. The VA buyer has earned the right to use the VA financing by serving our country.
What fees??? There is a VA addendum whereby YOU can limit the lender fees. I limit them to $400 and if a seller balks, I pay the dang thing or with one of our Chase loan officers, he waives the lender fees. The only other thing is the credit report which is a stinking $50.
There is no reason to deprive a VA borrower of the right to use the best NO MONEY DOWN loan where the seller can pay ALL CLOSING COSTS. Which is the only way I know how to write them.
Get behind the VA loan. It will help you sell real estate. More importantly, it will help our VA buyers who have risked their lives to help us.
Morgan. Many agents hear rumors that it's a difficult loan. I find that it takes about 2 additional pieces of paper.
Many sellers (on advice of their listing agent) don't want a contract with a VA loan because they're tougher on appraisals. That has changed a lot recently. If the VA appraiser finds necessary repairs, the dang seller should have made them before listing the house.
We refuse to cooperate with any seller who "says" they don't want VA financed buyers. That's just nonsense. We write it anyway. I have no hesitation putting a listing agent and seller on the spot when they try to force a VA buyer to forfeit the right to use their benefit. We get them through. It's certainly easier today than 4-5 years ago.
VA financing is a true 100% financing and the seller can pay ALL closing. Find me a better loan.
Carol. The government doesn't care about these things. The government is the one who killed off the Ameridream and Nehimiah.
Sandy. It's usefull for many VA financed owners.
Nannette. Good for you. Another arrow in your quiver.
Ryan. Good for you.
Fran. It appears that you are correct.
Debbie. I have recommended that VA relocating personnel rent unless they're going to be here long enough to gain sufficient equity to pay the cost of sale.
Terry. Thanks. Hope it helps.
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.
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.
Susan. That's funny. I'm sure you mean "fan of ActiveRain".
Tony & Darcy. Glad to help.
Gabe. My pleasure.
Brian. Stick around. You can get lots of lessons on ActiveRain.
Shirly. Like any government program, they seek to eliminate recipients. Glad to help.
Vicki. Glad to help.
Jim. VA financing is available to any one with VA benefits. They don't have to be active duty. I'm selling a new home in Southern MD now with a VA couple. They have a home in Waldorf using his VA benefits and they're using her VA benefits to finance the new construction.
Hugh. VA takes a lot of guff from Congress, but the are in the right direction with VA loans.
Gary. It's an oldie but goodie.
Barbara. VA buyers can be anywhere. Many served in Viet Nam and later. They are all eligible.
Gary. That's where you'll need it.
Vicki. Glad to help.
Lenn, You did it again, you brought some truly valuable information to the table...awesome! Thank you.
Lenn,
Thank you for sharing! Wonderful information to have and by the looks of it many of us had no idea it was out there. Thank you, Thank you, Thank you!
Lenn - Thank you so much for sharing this. I have a lot of military clients and - honestly - while I have worked quite a few VA loans I had no idea this program existed.
Lenn - Good info and good to know of it! One would think tht if the Feds can give bilions to the big three, they could do just a bit more forour vetrans - wouldn't one?
Lenn, thanks for this post. I was unaware of this benefit. We have a training scheduled mid Jan. with lenders regarding VA and I will make sure to include this.
Lenn, thanks much! Excellent info.
Len - thanks for the info. My brother has been trying to sell his home for almost 2 years now, and they will be upside down if they reduce any more. 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? Or are odds they won't be able to pursue this? I'll check with my lender, but if you knew that would be great! Great info! Liz
Interesting -- likely we will see more of these as this market keeps moving. Thanks for the info. All the best.
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!
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!
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
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.
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!
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.
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.
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.
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.
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.
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.
"Good Morning Lenn,
"This is a most honorable program."
In deed that's what I though I said!
Bill
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......
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.
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.
Does Active Rain "RE-FEATURE" blogs?? Because this would be a GREAT BLOG to re-feature!