Destin Florida Short Sales & Real Estate by Wendy Rulnick

 
One of the biggest sources of confusion I find with Eglin Air Force Base HAP sales from the seller comes at closing.  First, if you don't know what HAP is - it's the Homeowner Assistance Program from the Department of Defense.  It's designed to help military members who have permanent change of station orders (PCS), and are "upside down" in their home values, i.e. owe more on their mortgages than their property's market value. HAP will pay the mortgage deficit under certain circumstances, which helps the service member avoid the credit impact of short sale or foreclosure due to their mandatory relocation.

One of the stipulations of HAP is that the Eglin airman is current on his mortgage payments, taxes and association dues, or that is the extent to which the benefits apply. For example, if you were six months behind in your mortgage, HAP would not pay the amounts in arrears to satisfy your bank. You must. So what's the issue? Even service members who are "current" on their mortgage payments will normally owe a pro-rated amount of mortgage interest, taxes and maybe association dues at closing. Remember, mortgage interest is paid in arrears. If you have a payment due on March 1, that would cover the interest for the month of February, not March. 

My last HAP seller asked me why he had a bill for almost $1500 at time of closing from the U.S. Government title agent.  I told him it was probably his mortgage proration. He said, "But I made my mortgage payment!" I said, "Yes, but that covered the previous month."  If your closing is mid-month, you would owe about two weeks worth of interest to your mortgage company, which will be collected by the title agent to pay your lender at closing.  That goes for taxes and association fees, too. 

Florida's property taxes are paid one year in arrears (not all states handle their property taxes the same way).  That means that the tax bill for your Navarre, Niceville, Crestview, Fort Walton Beach or Destin property covers the previous year (arrears). If you close on September 1, for example, the buyer will still receive the tax bill for the time YOU owned the property during the past year. That wouldn't be fair, would it? So at time of closing, you have to reimburse the buyer the eight months to apply to the tax bill they will be getting at the end of the year. Yes, your mortgage company normally (but not always) escrows this amount in your total mortgage payment. You will get a reimbursement check after closing for any remaining balance in your escrow account. But for the HAP closing, you will owe the year-to-date taxes that are due.  The same applies to homeowners association dues.  The government won’t pay those on your behalf.

So what is a reasonable expectation for funds the Eglin service member might
need for closing? Set aside enough to cover one mortgage payment, and potentially, almost a year tax obligation. You probably will not need all of it, but be prepared “just in case”.

It's Wendy!

Wendy Rulnick, Broker, Rulnick Realty, Inc.

Call toll-free 1-877-487-9639 or local 850-650-7883 ext 204
Email Wendy: itswendy@rulnickrealty.com 

Wendy Rulnick, Broker, is a short sale and pre-foreclosure specialist and has been featured in "Kiplinger Personal Finance Magazine" and "Florida Realtor Magazine". She has successfully helped hundreds of families avoid foreclosure through short sale along the Emerald Coast of Florida. Wendy Rulnick is knowledgeable in all aspects of short sale, including VA Compromise Sale, FHA HUD pre-foreclosure sale, HAP military PCS, HAFA, Bank of America Coop program and more.  She is also co-founder of www.ShortSaleSuperstars.com and short sale instructor to agents across the United States. Wendy Rulnick sells real estate in Destin, Santa Rosa Beach, Fort Walton Beach, Niceville, Bluewater Bay, Navarre, Seagrove Beach, Watercolor, Sandestin, Seaside, Crestview, Rosemary Beach, Mary Esther, Shalimar, Panama City Beach, Eglin AFB, Hurlburt Field. 

 

 

HAP is the Homeowners Assistance Program that helps Eglin Air Force Base or Hurlburt Field airmen PCSing to new bases who have upside-down equity in their homes.  That is, their mortgage balances are more than the fair market values of their properties. HAP helps those military members who are ordered to transfer to new bases avoid foreclosure, short sale and VA Compromise Sale by paying off the mortgage balance not covered by the sales proceeds due to declining market values.  If you qualify for HAP, there are three main programs for assistance:  Government Acquisition (GA), Government Assisted Private Sale (GAPS), and Private Sale (PS).  

 

In this article, we’ll example the Government Assisted Private Sale (formerly called Private Sale Augmentation).  Will it work for you? Let’s see…. 

 

GAPS is a more complicated HAP program, but you could end up putting dollars in your pocket if the calculations work in your favor. To figure out how much of your mortgage and closing costs it will cover, HAP calculates  90% of your prior fair market value (your purchase price plus costs of improvements), adds about 7% for closing costs, then subtracts out your new purchase price and mortgage payoff, plus any buyer credits and actual closing costs.  If you have put enough improvements into your home, or the purchase price is high enough, or your mortgage payoff low enough, that's where this program makes sense - your mortgage and closing costs will be covered and you get money back at closing. Let's look at an example.

 

For our example, let’s start with these numbers.

 

Original Purchase Price             $300,000

Improvements                             $20,000

Total Prior Fair Market Value    $320,000 (PFMV)

PFMV $320,000 x 90% =              $288,000 (HAP benefit)

Sale Price                                    $200,000

HAP Closing Cost Estimate       $14,000 (sale price x 7%)

Outstanding Mortgage               $250,000

Seller Subsidy,Closing Costs    $7000

Now, to put our calculations together….

Property Benefit = .90 X 320,000(PFMV) = 288,000 - 200,000 (sale price)  = $88,000 (property benefit)

 

Estimated HAP Benefit = 88,000 + 14,000 (est closing costs)  = 102,000
Cash to Closing = (200,000 purchase price  + 102,000 = 302,000) - (250,000 mortgage balance  + 7,000 seller subsidy = 257,000) = 45,000
SELLER GETS $45,000 Back at closing!

 

How would the GAPS HAP Program not work for the Eglin AFB Service Member? Let’s alter the numbers, and pretend the outstanding mortgage balance were higher, let’s say $285,000, and the sale price lower, like $180,000, and all the other numbers were the same.

 

In that case:

Cash to Closing = (180,000 purchase price  + 102,000 = 282,000) – (285,000 mortgage balance  +7,000) = 292,000) =  -10,000 Uh Oh!! Seller would have to bring $10,000 to closing!  This GAPS program would not work to the benefit of the Eglin or Hurlburt airman.

 

What’s the alternative? Use the standard HAP Government Acquisition (GA) program.  In the GA program, HAP will simply pay off the mortgage balance at closing, plus 3% buyer credit of allowable closing costs.  There would be a closing first between the U.S. and the service member, then a same-day closing between the U.S. and the buyer the service member found through his Realtor who specializes in HAP.

 

There are more detailed criteria that apply to each HAP scenario.  If you are PCSing, need to sell, and want to avoid foreclosure, short sale or VA Compromise Sale, HAP may be your best option.  Questions?  Give me a call.

It's Wendy!

Wendy Rulnick, Broker, Rulnick Realty, Inc.

Call toll-free 1-877-487-9639 or local 850-650-7883 ext 204

Email Wendy: itswendy@rulnickrealty.com

Eglin AFB Short Sales & Pre Foreclosure Help.

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Wendy is a short sale and pre-foreclosure specialist and has been featured in "Kiplinger Personal Finance Magazine" and "Florida Realtor Magazine". Call Wendy Rulnick, Broker/Owner, to list and sell your home or condo on the Emerald Coast of Florida in Walton, Okaloosa and Santa Rosa County-  Destin, Santa Rosa Beach, Fort Walton Beach, Niceville, Bluewater Bay, Navarre, Seagrove Beach, Watercolor, Sandestin, Seaside, Crestview, Rosemary Beach, Mary Esther, Shalimar, Eglin AFB, Hurlburt Field.