Post from MilitaryByOwner
A PCS plan doesn't usually include a contingency for a house that doesn't sell. Most military homeowners assume that the traditional home-selling sequence of preparing, listing and signing will take care of the property at their current duty station.
For most, this is the case. But there are owners who need alternatives to selling their property, either because their local real estate market isn't feasible or because their individual finances have put their mortgage in a precarious position.
If you're in one of these situations, review your overall marketing strategy for miscalculations such as an overpriced home. Next, confirm your real estate agent is the best professional suited to your situation.
But if it still doesn't look like a home sale is in the near future, it's time to consider backup plans.
Some choices, such as a short sale, may seem drastic. But other options, like turning the property into a rental, just might be doable.
3 Backup Plans for When You Can't Sell Your Home
1. Become a military landlord.
Buyer demands are specific, often dependent on the location. It's tough to point out exactly why a home won't sell on your preferred timeline. To continue to pay your mortgage, you may need to consider pulling your home off the sale market and becoming a rental property owner.
For the last several years, the majority of the U.S. has been engaged in a healthy sellers' market; however, this might not be the situation in your neighborhood. Stalled sales often stem from random, but impactful, situations out of your control. Some examples might include if your neighborhood has a saturated inventory of a similar style of home or if a major roadway construction project is underway.
The option to convert your home into a rental property is likely one of the first remedies that comes to mind. This is a productive solution for military homeowners who find themselves unable to sell their home around a specified PCS timeframe. But there are homeowners who aren't interested in becoming a landlord and operating a rental business. A rental property is time-consuming work and could require a significant amount of money upfront to prepare for renters.
Income from the rental is an attractive reason to begin digging into landlord life, but behind the rent check each month lies the responsibility of managing the tenant-landlord relationship effectively. Successful rental home businesses occur when the owner is an active participant in the process.
Take a look at some of the issues new landlords encounter:
- Determining whether to hire a property manager or self-manage the business.
- The need to convert homeowners insurance into rental property insurance, which is a cost increase.
- The potentially expensive process of preparing and repairing the property to meet safety and code standards.
- Investigating legal issues, including taxes and tenant screening.
- Maintaining cash flow to cover planned and unplanned rental property expenses.
Alternatives to a Typical Home Sale
Some homeowners don't have the choice to become landlords, or they'd prefer to conduct a final selling transaction and be rid of the property. The following choices are not optimal. Choose financial and real estate professionals with experience with these processes to guide you through the system to make the best of a bad situation.
2. List your home for less than market value.
At this point, you've scrutinized the best pricing for your home. Now, it's time to find the next best number, even if it's less than you hoped for. House hunters looking for a bargain aren't in short supply, and they're prepared to make quick deals, particularly if they're investors who specialize in houses selling under duress.
Although not ideal, selling for less than market value can alleviate the stress of a difficult financial situation or a challenging PCS, such as a move OCONUS.
3. Investigate a short sale.
For military homeowners who are considering selling their home because of financial distress coupled with a PCS, a short sale is a possibility and is preferable to a foreclosure. However, be aware-- with a short sale or a foreclosure comes credit score ramifications, possibly leading to difficulties maintaining a security clearance.
A short sale occurs when the price of the home is lower than the amount owed on the mortgage. The lender who backed the loan must approve the short sale. Some lenders offer forgiveness between the sale price and the mortgage amount, but this is not a standard throughout the mortgage industry.
Fannie Mae, the federal government's entity for helping citizens find funding for housing by backing loans, offers a guide for military members who are struggling with mortgage payments. Part of it reads:
"If you're a service member struggling with your mortgage payment, you may qualify for special military options.
Military Hardship may be an option if:
- You've received Permanent Change of Station (PCS) orders
- You're in active-duty service (or just left)
- You (or your spouse) have been injured in active duty."
For those who need in-depth assistance with a below-market home sale, turn to real estate professionals who are knowledgeable about these programs and accustomed to working with service members and VA loans.
A PCS move with an uncertain home sale outcome is stressful, but there are options to consider. Many service members are successful landlords and choose this lifestyle as part of their overall retirement and investment strategy. If you properly prepare, the rental business could prove to be a source of income and a great relief in the coming years.
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