The Emerald Coast of Florida has a high military population with both active duty and retired air force personnel. Eglin Air Force Base is located in Fort Walton Beach, and Hurlburt Field is in Navarre, Florida. Duke Field and NAS Whiting Field are nearby. We will be seeing an increase in short sales for GI borrowers when they must relocate during their PCS moves (permanent change of station). VA Short Sales are called “Offers in Compromise”, “Compromise Claims” or “Compromise Sales”. The VA may accept a Compromise Sale if the cost to the VA is determined to be less than that of foreclosure.
The Veterans Administration VA Compromise Sale website says: “If the borrower is unable to sell the property for an amount that is greater than or equal to what he/she owes on the loan, including closing costs, VA may pay a “compromise claim” for the difference in order to allow the private sale to go through. The borrower can sell the property to a buyer who gets his/her own financing or to a buyer who wants to assume the loan. However, with a compromise assumption, the lender does have to agree to have the amount of its guaranty reduced by the amount of the claim payment. In order to be considered for a compromise sale, several factors must be considered.”
VA Compromise Sale Factors:
- You may only sell the home for fair market value.
- The closing costs must be “reasonable and customary”.
- You must have a valid financial hardship such as loss of income, relocation, death of breadwinner, etc.
- There should not be a second mortgage on your property, unless it is “insignificant”. If so, you might ask the junior lienholder to release the lien and convert it to a personal note.
- You should ensure your sales contract is “contingent and/or subject to the approval of a VA compromise sale.”
Important Points:
- Your lender does not have to agree to a Compromise Sale.
- For VA loans originated on or before December 31, 1989, you might have to sign a promissory note at closing agreeing to repay VA for the deficiency remaining after the property is sold.
- Wendy Rulnick will guide you through the sales process, help you determine fair market value and prepare your package for submission to your lender or the VA.
Two questions always come up when I help with VA Compromise Sales:
- How will a VA Compromise Sale affect my credit?
To get a direct answer, I called the Veterans Affairs Regional Office in St. Petersburg (telephone 1-888-611-5916), which covers the state of Florida. They told me VA Compromise sale is reflected as “settled for less” on credit reports. “Settled for less” is a common reporting for short sales, as well. The exact number of points that your credit will be affected depends on your complete credit picture. Remember, if you missed payments, that will also show up on your credit report.
- Will I be able to get a VA loan again if I do a Compromise Sale?
Yes, you may still be able to get a VA home loan with your remaining entitlement. Specifically, the Veterans Administration says: Should VA agree to pay the difference between the sales proceeds and the total debt to complete the compromise sale process, the portion of the homeowner’s entitlement used to guaranty this loan will remain tied up until VA is reimbursed in full.
In fact, I have worked with a Veterans who re-paid his entitlement after a compromise sale, in order to get a VA loan again, because the rate and terms were more favorable. But remember, there are other types of mortgages that will be available to you, if you are unable to seek another VA loan. If you are a service member or Veteran near Eglin AFB, Hurlburt Field, Duke Field or Whiting Field, and think you might need to do a VA Compromise Sale or short sale I can help.
Need to do a VA Compromise Sale? Contact Wendy Rulnick, Broker
850-259-0422 or email [email protected]