VA Compromise Sale
The Southern California area has a high military population with both active duty and retired air force personnel. 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 VA 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:
1. You may only sell the home for fair market value.
2. The closing costs must be “reasonable and customary”.
3. You must have a valid financial hardship such as loss of income, relocation, death of breadwinner, etc.
4. 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.
5. You should ensure your sales contract is “contingent and/or subject to the approval of a VA compromise sale.”
Important Points:
1. Your lender does not have to agree to a Compromise Sale.
2. 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.
3. Tom Olsewski 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.
ANNOUNCEMENT January 2011 – The Veterans Administration is now directing VA lenders to pay $1500 relocation assistance at closing to those approved for a VA Compromise Sale. This assistance is currently available until January 1, 2014.
Read Why Should I Compromise Sale here?
Read more VA Compromise Sale Questions and Answers here.
