Short Sales and the Military

Special Military Benefits Make Short Sales Easier

One of the causes of financial distress is relocation.  Being in the military is a frequent cause of relocation, so it makes sense that there are special programs for short sales and other assistance for the military.  Members of the Armed Forces do so much for our country that it is important for real estate agents to provide special service to them. 

Military personnel and federal employees who are “under water” with their mortgage can benefit from a program by the Department of Defense that is administered by the US Army Corps of Engineers under the Base Closure Act known as HAP (Homeowner’s Assistance Program).   This program was extended under the American Recovery and Reinvestment Act of 2009.    For full information, go to http://hap.usace.army.mil/

This program was originally designed to apply to members of the military or federal employees who owned a principal residence in an area where a base closure or realignment caused the values of the homes to decline. However, it has been extended to military personnel who were reassigned and had to move more than 50 miles during the mortgage crisis.  These military homeowners qualify if they were reassigned between February 1, 2006 and September 30,  2012, they purchased the principal residence that they are selling before July 1,  2006 and they sold it between July 1,  2006 and September 30,  2012.

It also applies to members of the military and federal employees who were wounded in the performance of their military related duties after September 11, 2001, as well as the surviving spouse of someone who was killed in action after that date.  The website encourages people who may not fit all of the requirements to apply anyway to see if they can get benefits.

The website says that “HAP provides assistance in four ways. For eligible applicants, the Government may:

1. Reimburse you for part of your loss from selling your home.
2. Assist you, if you don’t have funds from the sale of your home to pay-off your mortgage.
3. Purchase your home by paying off the mortgage.
4. Help, if you default on your mortgage. “

For short sales,  the private sale reimbursement program is the most applicable.  Under that program,  the military member or qualified government employee sells their home and gets reimbursed for some of the losses on the sale of the home.  This reimbursement is used to pay off the lender so that if there are enough proceeds the lender gets fully paid.  If not, it is a short sale that is partially reimbursed.  The website indicates that the amount of reimbursement can be 95% of the difference between the value of the house before the base closure and the current value (or sales price), but it also indicates there can be a payment of 90% of the original value of the home, with the added value of any improvements to the home.  The seller can also be reimbursed for closing costs, including the real estate commission.  

So, the home is sold with a short payment to the lender, but with an agreement to reimburse the lender later when these benefits come in.   This is an excellent use of the short sale process, as it gets the seller moved gracefully and may get the lender fully paid.  At a minimum, the lender will get more than just the sales proceeds of the short sale, as the reimbursement is in addition to what the buyer will pay for the purchase price.

So, if your seller is in the military or a qualified federal employee, look into these special benefits.  The members of the Armed Forces deserve to get every benefit allowed, as they have definitely earned it.