VA LOAN CAPTAIN BLOG & Learning Center

Short Sales and Foreclosures?

By: Grant Moon 11/05/14 11:26 am

Even though home values have been on a steady climb over the past two or so years, there are still places where distressed properties still exist. Foreclosure rates have slowed and that’s a good thing but they’re still there. Unfortunately, that will never go away. And there are places where property values have yet to recover to their pre-recession levels. Someone may want to sell but can’t because they owe more than their home is worth. For those who qualify in such a situation, a short sale can be a remedy.

Can you use your VA home loan benefit to finance a foreclosure or short sale?

Yes, you can. But you need to understand the process. When a bank forecloses on a property the home is put up for auction yet requires a minimum bid. A home with a delinquent $200,000 loan attached to it won’t be sold to the highest bidder if the bid is say, $10. And those with successful bids who meet the minimum must pay up within a relatively short period of time, say in 24 hours. Cash is king in this instance and there’s no time to apply for a loan.

VA loans can buy a home that has been foreclosed upon once the bank places the property in its Real Estate Owned department, or REO. Once the property is transferred to the REO, you can make an offer and finance the transaction with a VA loan, just as you would any other home.

With a short sale it’s a similar situation. There’s nothing tricky financing a short sale property and you can certainly use a VA loan. Remember though a short sale has to be negotiated between the current owner and the lender. You can’t just make a lowball offer, the lender has to agree to accept less than what is owed. In either instance, a foreclosure or a short sale, there really isn’t much to consider when buying a home and financing it with a VA loan.

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