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#452614 - 05/18/16 10:38 PM Selling/Buying advice
Paulo Offline
Junior Member

Registered: 05/18/16
Posts: 1
Loc: NC, United States
Hi everyone, new member and looking for advice. I apologize if this is long and will try to make it as short as possible.

Background:
Two years ago I decided I wanted to separate from the military once my enlistment is up and bought my first house (townhouse) where I plan to go to school/work near the city (1hr drive one way from base). I bought a townhouse using my GI bill in a very nice, safe and highly desired city(Downtown, University, Main shopping stores, Airport are all within 10min drive). Fast forward to today; I'm now thinking of staying in the military. On top of that I realized I'm a guy that needs privacy and a garage. So with that 1hr drive + wanting a garage I'm looking to sell my townhouse to buy a single family house halfway between the city and base.

Question:
With all that in mind, what options do I have to selling and buying? I will be using my GI bill again but will need to sell my current home first. Problem is I may lose $ considering it's only been 2yrs since I bought it and townhomes do not sell as easily as single family houses. If I sell at a loss, can I transfer the money lost to a new mortgage? I've researched and can't find much on this process. Thanks in advance!

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#452615 - 05/19/16 12:17 AM Re: Selling/Buying advice [Re: Paulo]
Vermont Offline
Major Contributor

Registered: 04/12/08
Posts: 7678
Loc: Vermont's North-East Kingdom
What you're saying is that you "may" have to sell at a loss, meaning the TownHouse may not be worth what you paid or what you still owe on it.

If it is the latter that is the case, then you would be considered a "Short Sale"; someone trying to sell while being underwater . . . . or Mortgage balance exceeding current Value; but I wouldn't conclude that unless you've at least made the effort to sell it for what you paid or more first. You'll be required to pay cash to make up the difference or carry that deficiency on your credit record into the future; and the Lender may secure a Deficiency Judgement against you, or if the Lender forgives the indebtedness, then the IRS may demand that you pay Income taxes on the difference. A "Short Sale" is something to be avoided if possible.

There's no real benefit to using a VA Mortgage (GI Bill) once you have built up some equity. Mortgage Interest Rates are usually preferable on conventional loans . . . . the real benefit comes with the VA providing the Insurance Guarantee for the debt, more often known as Private Mortgage Insurance (or PMI) which is only valuable when you have less than 20% to serve as a Down Payment and have little or no Equity. That's why most Veterans only need the assistance of a VA Loan but once because they acquire some Equity on the 1st Property and then don't need a VA Guaranteed Loan the 2nd time.

Read some of the Threads in our Forum entitled "Short Sales" to find other people in situations similar to yours . . . . but I don't think you'll find anyone transferring a loss experienced on one property mortgage onto a new property where they'd be starting out with a new mortgage that's already "underwater" because of the previous loss. It doesn't work that way.

If you had a gain, that gain "could" serve as your Down Payment for a new loan, or as Equity at the origination of the Loan; but it doesn't work in reverse when you have a loss; the first Loan must somehow be closed out, one way or another, and its losses are not going to be associated with any new loan. If your Lender allows you to sell short, then that loss will be on your record and greatly inhibit your ability to obtain a new loan.

Mortgages are like Marriages; they're structured for the Long Run. Rentals and Leases are there for the temporary "Short Runs".

Good Luck !
_________________________
Dale C. Hittle of GOLDEN RULE PROPERTIES in Glover, Vermont
Where We're Always Striving To Put Together "THE FAIR DEAL"

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#452629 - 05/19/16 11:31 PM Re: Selling/Buying advice [Re: Paulo]
Bigtoe Offline
Major Contributor

Registered: 10/14/07
Posts: 2232
Loc: Outer Banks
If you can afford to sell at a loss and this would improve your life, go ahead and do it. A short sale will mess up your credit so be careful with that.

you need to talk to a tax person about what you can do with the loss, if you can not transfer it to the new house, you might be able to write it off. Best of luck.
_________________________
Your Outer Banks real estate agent. Helping people buy and sell OBX real estate since 1989.

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#452666 - 05/22/16 05:25 AM Re: Selling/Buying advice [Re: Paulo]
barb43 Offline
Veteran Member

Registered: 07/31/08
Posts: 1156
Loc: SW Okla
In the Ft. Sill/SW Oklahoma area, military folks sometimes (often over the past couple of years) find they need to move on to their next duty station within 18 to 24 months of purchasing a residence using their VA.

They're still upside down on their mortgage at that point, almost always - so no equity. And we are in a very slow market, so the property could set empty a long time.

These sellers are putting their property on the rental market, often with one of the property management companies in the area. It may take a few months to get rented, but it's often a shorter time period than it takes to sell. That way, somebody is making the mortgage payment. wink

The soldier, in the above example, may be able to use up the remainder of their VA entitlement to purchase another house. I see this happen every once in awhile.

You might check into selling and buying this way, Paulo. Hope you'll let us know how things work out.


Edited by barb43 (05/22/16 05:26 AM)
_________________________
Remodeling houses & helping tenants get ahead in life since 1983. Licensed Realtor since 2005.


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