In recent years, home values have fallen into a tailspin for countless active duty military members, many of whom have gone underwater on their mortgage. This means they owe more on their mortgage than what the market dictates the value of the home is. Complicating this issue for military homeowners is the looming possibility of receiving Permanent Change of Station Orders. An owner without equity may be forced to endure lengthy delays in the home sale, a luxury PCS orders negate. Limited equity is undeniably adverse for veterans in need of quickly selling their home; however it is crucial to remember all homes can be sold, even those without equity.
What is Home Equity?
After subtracting the owners’ unpaid balance on their mortgage from the market value currently assessed by a valuator, home equity is determined as the amount of money left over. As the debt is paid down, home equity rises. Additionally, equity increases when a home’s value appreciates.
VA Home Loan Centers has compiled a list of five options that under-equity military members have when they need to sell their home.
Military members and veterans who need to sell a home they are underwater on have no better solution than a compromise sale. Also called a short sale, this transaction happens when the owner and lender agree to sell the home for less than what is owed. For this to happen, the bank must approve of and agree to take a loss on the sale in writing. A short sale is far more favorable than a foreclosure; it will do much less to damage your credit and future ability to purchase a subsequent home. The Department of Veterans Affairs allows veterans to qualify for a VA loan following a short sale. For veterans and active duty personnel in need of a short sale, remember, VA Home Loan Centers HAP military short sale avoidance program was created to help owners who need to sell homes with less property value than mortgage balance. This program is provided at no cost to eligible applicants. VA Home Loan Centers will aggressively market the property; where appropriate offer closing cost credits and other incentives to help secure a buyer. VAHLC will also provide representation for the seller if they do not have an agent. Although there is no telling how long the short sale process will last, VAHLC will do everything we can to expedite the process. After finding a buyer, it takes 30 to 60 days to receive approval and then an additional 30 to close.
Using a REALTOR® to sell a home without equity:
Probably the most useful solution to the obstacle of selling a home without equity is to find a good agent. Using an expert who will aggressively pursue buyers, and price the property right is incredibly important. The greatest obstacle for sellers, in hiring an agent, is associated fees cutting into already thin selling points. The reduced sales price combined with the cost of paying off your loan is troublesome for many. Some agents will ask for up to six percent in commission associated fees. This can dramatically lower the profits of the sale. VA Home Loan Centers offers assistance to underwater veterans without charge if they are short selling a home.
For Sale by Owner (FSBO)
While we recommend that sellers use agents, many veterans are savvy enough to sell without the help of an agent. If a buyer is already lined up hiring an attorney to handle, the paperwork could be a significant cost savings to the seller. Veterans who are working without an agent need to price their home accurately, beautify the home, effectively market the home and get the home inspected.
Veterans without equity who are short on time following a PCS can often sell their home quickly to an investor or investment group. Many companies are willing to purchase property with limited equity if the seller lowers their asking price.
National We Buy Homes Companies
Similar to investment groups, national we buy homes companies will work with sellers looking to unload the property quickly. Providing quick cash to eager homeowners looking to get their home off the market, these transactions happen without REALTORS®, agents and brokers. The danger of this is selling for well below your asking price and market value. If you are interested in this option, make sure you get a solid appraisal.
Although selling your home when it does not have equity is daunting, it is critical to remain positive. There is no such thing as a home that cannot be sold. If you currently owe more than what your home is worth contact VA Home Loan Centers at 877-573-4496 to discuss your options.