“I’m in the military and I’ll be up for new orders soon. This means I have to move to a new state. I’m having trouble selling my house because I owe more on the loan than the house is currently worth. What are my options in this kind of situation?”
Lately, this has been a pretty common question at the Home Buying Institute. Sometimes the person who writes is a military member. Other times it’s the spouse who is in the military. Either way, the scenario is always the same. The person (or the couple) has to move because of a duty-station transfer, and they can’t sell their house for some reason.
Being upside down in the mortgage loan is the most common reason — this means the homeowners owe more on the mortgage than the home is worth in the current economy. It certainly doesn’t help that two of the states with the biggest drop in home values (California and Florida) also have big military populations.
I can sympathize with these folks, because I spent eight years in the military as a Navy man. I know what it’s like when you have to move on a certain date, and you have no choice in the matter. So in this article, I’d like to explain some of the options available for military people who need to sell a house prior to a move, particularly those who are upside down in their mortgage loans.
What Selling Options Do You Have?
First off, you must understand that not all of these options will be available to you. Every situation is different, so there’s no “best practice” that applies across the board. My purpose in creating this list is to give you some topics for further research, in the hopes that one of them will work for you. With that said, let’s talk about some of the things you can do when you’re upside down in the loan.
- Short Sale — This is a home-selling technique in which your mortgage lender agrees to accept less than what you owe, in order to sell the house. You, of course, would not make any money from the sale. But you would at least get the property off your hands and the mortgage off your shoulders. For people who are in the military and need to move (but are upside down in the mortgage loan), this can sometimes be a viable option. You would need to contact your lender and explain the situation to them.
- Rent It Out — You could also turn your current home into a rental property, and then move into the new home. This can also be a viable strategy for military folks, because there are plenty of potential renters around military bases. New residents are always transferring into the area, and many of them would rather rent than buy a home (to avoid situations like the one we are discussing). A renter can help you make the mortgage payments on the home, and over time the upside-down situation will decline.
- House Trade / Swap — This is a rising trend in the real estate industry, mainly because so many people are having trouble selling their homes right now. There are several websites online today that match buyers and sellers in different areas. For example, if you’re moving from Jacksonville to San Diego, the housing swap site would try to connect you with people doing the reverse — moving from San Diego to Jax. Click the link to read a Time magazine article on this subject.
- Walk Away / Foreclosure — I put this option last for a good reason. It’s a last resort. In my opinion, there’s almost always a better way to go. But there are certain scenarios where the homeowner has no other choice. This happens quite a bit with people who are significantly upside down in their loans. They simple mail the keys to the lender and say, “The house is yours.” Mortgage companies refer to this as “jingle mail,” for the way the envelope jingles.
Recommended Reading for Military Members
Here are some more articles I found around the web that cover this subject. If you’re in the military and need to move, but you’re having trouble selling your house, you should read these:
- Military Members Caught In Housing Crunch
- When You Can’t Sell Your Home – Military.com
- Where is Real Estate Relief for Military Families – Newsweek
- Some Military Members Get Help Selling Homes
I hope this helps you understand your options when you need to move due to a military transfer. And as a veteran, I would like to thank you for your service. Good luck.