What Is A VA Compromise Sale?

A VA compromise sale is designed to help veterans who have a VA mortgage and need to sell their home, but would end up taking a loss in the process.

This type of situation can occur for several reasons, which include: needing to move overseas from a station change, or a divorce.

In any case, if you bought a home with a VA loan back when the housing market was healthy, you probably didn’t foresee the need to sell your home in the lackluster housing market of today.

For many veteran borrowers who are facing this scenario, taking a loss on the sale of their home could result in extreme financial difficulty.

Luckily, you may be able to qualify for a VA compromise sale.

If you are selling your house and receive a bid for less than what you still owe on your VA loan, you can turn in an application with the VA for a compromise sale. In many ways it is similar to a short sale of a home with a conventional mortgage. 

The good news is that if you receive approval for a VA compromise sale, then the VA will redeem you for the difference between what you can sell your house for and what you have left on your VA loan.

In order to begin the compromise sale process, you must show proof of:

  • Financial difficulties.
  • The realistic market value of your house at time of sale.
  • A VA appraisal.
  • Standard closing costs.
  • No second lien (the VA does makes rare exceptions if the total is not significant).
  • The reasons why you are selling your home.

Another important component of getting approved for a VA compromise sale is that the total net loss should be less than if the property was taken back by the bank through foreclosure proceedings. So basically, if it costs more to foreclose vs “short sale” the home, then there is a greater chance of getting a VA compromise sale approved.

On another note, if your VA loan originated before December 31, 1989 you might have to sign a promissory note as well as enter a payment plan to redeem the VA a percentage of the compromise claim payment. This sum would end up being less than what you would owe if you did not originally have a VA loan, and the payment plan itself is formulated around what you would reasonably be able to pay.

If you feel that you may be able to qualify for a VA compromise sale, don’t hesitate to contact us for further information.

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