The VA short sale process explained!
The VA foreclosure moratorium is over!
VA has had foreclosures on hold for quite some time as they introduced new options for struggling borrowers in 2024, but time is up. Per MPA, Foreclosure starts surged by 30% in January, while foreclosure sales climbed 25%. Active foreclosure inventory also increased by 7% over the month.
If you have a VA loan and owe more than your home is worth, but need to sell anyway – VA has a workout solution: THE DEPARTMENT OF VETERANS AFFAIRS COMPROMISE SALE PROGRAM!
Like any other government short sale solution, VA has a very strict and specific short sale process. After completing many VA compromise sales, I have found them to be quite predictable and reasonably fast (for a short sale anyway).
VA considers several factors when a homeowner is when seeking approval for a VA compromise sale:
- The property must be sold for fair market value.
- The closing costs must be reasonable and customary.
- The compromise sale must be less costly for the Government than foreclosure.
- There must be a financial hardship on the part of the seller.
- On loans that originated on or before December 31, 1989, the lender must be willing to write off any debt above the max guaranty.
- There must be no second liens or other liens (unless the amount is insignificant). In second lien situations, the buyer or seller may have to pay out of pocket to resolve the second lien.
- The seller must first obtain a sales contract in order to be considered for the program.
- To protect the seller’s interest, the seller should make the sales contract contingent and/or subject to the approval of a VA compromise sale.
The VA compromise sale process is not very different from most other standard short sale program and the same basic steps apply.
The most notable difference between VA most other short sales is how the remaining debt is handled. While in most short sales the deficiency balance is forgiven and then becomes a taxable event to the homeowner, VA neither completely forgives the balance or requires repayment. Instead, 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.
A VA SHORT SALE MAY BE AN OPTION IF YOU:
Have been transferred by the military and need to sell, but lack the equity to do so.
Are facing Connecticut foreclosure, or wish to stop the foreclosure process.
Owe more than your home is worth and lack the funds to make up the difference.
Are falling behind with your mortgage payments.
Are facing a current or future financial hardship such as divorce, retirement, layoff, employment relocation.
Have had other workout options such as a forbearance or loan modification declined.
Are considering just walking away but want to avoid the consequences of foreclosure and/or a deficiency judgment.
We are grateful to Minna for her knowledge, professionalism and expertise in short sales. She truly cares about her clients and it is evident in the manner she represents them. She has a strong work ethic and keen negotiation skills when dealing with financial institutions and buyers. We strongly recommend Minna and her company if u want immediate results.
T.G.
Last Updated on February 25, 2025 by Minna Reid