There are two must-have guides for homeowners and real estate agents pursuing a VA compromise sale (commonly referred to as a ‘VA short sale’):
The first is written for real estate professionals and homeowners; the second for servicers (i.e. your mortgage lender).
Important facts to remember when negotiating an offer:
- After you have a fully executed contract, your lender will order a VA appraisal. VA will not approve the sale if the net proceeds are less than 88% of the new appraised value. Remember this when negotiating the price.
- For a compromise sale, VA discourages the seller from paying costs that are customarily paid by the buyer. You should have a strong argument ready for your lender if the contract reflects these expenses. VA may still approve these costs if the lender nets at least 88% of the appraised value.
- Don’t believe your lender if they tell you a customary seller’s expense is not approved by VA. (This is where the Servicer Loss Mitigation Program guide comes in handy. See the bottom of page 28 with regard to allowable costs.) This fact cannot be stressed enough: VA does not have a sanctioned list of “allowable” and “non-allowable” closing costs. If your lender uses this tactic to deny authorizing customary expenses, push back. Do not be afraid to call VA for backup (1-800-933-5499 or 1-800-319-9446). The VA is far more reasonable than your lender will have you believe.
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