A VA short sale, once called a compromise sale, is a sale to an outside buyer for less than you owe, approved by your servicer under VA rules. Under VA's 2026 servicer guidance, the net proceeds must at least equal VA's net value for the home, you receive no sale proceeds, and the servicer can pay $1,500 in relocation help if you live there. VA says the loss can reduce your future home loan benefit until you repay it, so ask about entitlement before you sign.
At a glance
| VA's term | Short sale (formerly compromise sale), 38 C.F.R. 36.4322(e) |
|---|---|
| Proceeds to the seller | None |
| Relocation assistance | $1,500 to borrower occupants (VA servicer guidance, 2026) |
| VA Partial Claim Program | Final policy published June 1, 2026 |
| Herriman typical home value | $601,499 (Zillow, August 2026) |
What is a VA short sale?
VA's servicer rules define a short sale, formerly called a compromise sale, as a sale of the home to a third party for less than the borrower owes, with the servicer releasing its lien in exchange for the sale proceeds (38 C.F.R. 36.4322(e)). The basic idea is the same as any short sale, explained on what a short sale means for a homeowner. What differs on a VA loan is who sets the floor price, what happens to your VA benefit, and how much relocation help is available.
A note on sources: the rules on this page come from VA's Servicer Handbook M26-4, chapter 5 (loss mitigation), read in the draft VA posted in early 2026. VA says its final policy was published June 1, 2026. The final chapter text was not reviewed here, so confirm each rule with your servicer.
Who qualifies for a VA short sale?
Under VA's 2026 servicer guidance, the servicer can approve a short sale when each of these conditions is met.
The servicer finds the loan insoluble
The servicer has to decide that the loan is insoluble, meaning it cannot be kept going. Ask the servicer which home-retention options, such as VA's new Partial Claim, it reviewed before reaching that decision.
Net proceeds meet VA's net value
The net proceeds of the sale must equal or exceed the net value VA sets for the property. Ask the servicer for that figure before you accept an offer, because an offer that nets less will not meet the rule.
You receive no sale proceeds
The current owner cannot receive any proceeds from a VA short sale. The only money VA's guidance provides for the seller is the relocation payment described below.
60 days behind skips the financial review
If your loan is 60 or more days delinquent and you ask for a short sale, the servicer does not need to evaluate your finances. If you are current or less far behind, expect a fuller review of income, expenses and hardship. How to describe a hardship clearly is on what to include in a hardship letter.
An outstanding partial claim needs VA pre-approval
If your loan carries a VA Partial Claim or COVID-19 partial claim balance, the short sale needs VA's approval in advance, not just the servicer's.
How a VA short sale works
The VA stages sit inside the general short sale steps, which are on each step of a Utah short sale.
Ask the servicer for a loss mitigation review
Call the servicer, say you are asking for a short sale, and ask which documents it needs. Send a complete application as early as you can. Under federal rule 12 CFR 1024.41, a complete application received more than 37 days before a foreclosure sale must be evaluated for all available options, with a written answer within 30 days, and the servicer cannot hold the sale while it is pending. The rule does not require any particular option to be offered.
List the home and find a buyer
List with a licensed agent and market the home at a realistic price. The servicer compares offers with VA's net value, so ask early what that number is and how long it is valid.
Submit the offer for approval
Send the signed contract and closing figures to the servicer. If there is a VA or COVID-19 partial claim balance, VA must pre-approve the sale. Get the approval in writing and read it for how the remaining balance is handled.
Close and get the lien released
At closing the servicer is paid the net proceeds and releases its lien. Keep the final closing statement and note the date the reconveyance is recorded, which matters under Utah law.
Money in a VA short sale: relocation, entitlement and the deficiency
$1,500 relocation assistance
VA lets servicers advance $1,500 in relocation assistance to borrowers living in the home who complete a short sale or a deed in lieu, and VA reimburses the servicer. The amount dates to 2011 and is unchanged in the 2026 draft guidance. It is lower than FHA's $3,000 or the up to $7,500 Fannie Mae and Freddie Mac offer, compared on relocation money and other pros and cons.
Your VA home loan entitlement
VA.gov says a short sale or deed in lieu could result in a loss or reduction of your future home loan benefit, and that if the loan ends in a foreclosure, short sale or deed in lieu, you will need to pay back the amount VA lost to restore your future benefit. VA calls this restoration of entitlement. Ask VA and your servicer what loss is expected on your loan before you accept an offer.
The deficiency and Utah's three-month rule
Read the approval letter for whether the remaining balance is waived. Under Utah Code 78B-2-313, a lender's suit to recover a short sale deficiency on a single-family home is barred unless filed within three months after the release or reconveyance is recorded. The bar does not apply if there was fraud, or if you signed an agreement with the lender to pay some or all of the deficiency. VA's own claim to recover its loss is tied to your entitlement, as above, and is a question to put to VA directly. Forgiven debt can also be taxable; see tax on forgiven debt after a short sale.
Example: a VA short sale on a Herriman home
Example only, not a real sale or an approval. A veteran's Herriman home is worth the city's typical value of $601,499 (Zillow's typical home value, August 2026), and the VA loan payoff is $640,000. The veteran is 90 days behind, so under VA's 2026 guidance the servicer does not need a financial review once a short sale is requested.
- A buyer offers $590,000. After commission and closing costs (say $40,000 in this illustration), net proceeds are $550,000.
- If VA's net value for the home is $545,000 in this illustration, the offer meets the rule; at $555,000 it would not.
- The servicer receives $550,000, the veteran receives no proceeds, and if they live in the home they can receive $1,500 in relocation help.
- About $90,000 of the loan is unpaid. VA's loss on the loan can reduce the veteran's entitlement until it is repaid.
If the numbers do not work, compare other ways to sell on selling a Herriman home with little or no equity.
VA short sale compared with other VA options
VA Partial Claim Program (2026)
VA's new Partial Claim Program is a way to keep the home. VA published the final policy June 1, 2026, began accepting Partial Claim trial payment plan events June 15, 2026, and VA.gov says servicers have until November 28, 2026 to implement it. VA covers the past-due amount as an interest-free balance that is repaid when the loan is paid off or the home is sold. You must complete a three-month trial payment plan first, and VA's draft chapter caps the amount at 25% of the unpaid principal balance, or 30% for certain loans with a missed payment between March 2020 and May 2025. The authority is 38 U.S.C. 3737, enacted 2025.
Deed in lieu on a VA loan
A VA deed in lieu is a voluntary transfer of the home to the servicer in exchange for release from all obligations under the mortgage (38 C.F.R. 36.4322(f)). The loan must be insoluble, title must meet VA's requirements, and you sign an agreement to vacate when the deed is recorded. The same $1,500 relocation payment applies if the home is free of other liens, kept in good condition and left broom clean. The broader comparison is on deed in lieu vs short sale.
VASP has ended
VA's VA Servicing Purchase program, VASP, stopped taking new cases on May 1, 2025, and active trial plans could run only through August 31, 2025. It is no longer an option to ask for.
Foreclosure
A foreclosure, like a short sale or deed in lieu, can reduce your VA benefit until VA's loss is repaid. In Utah it also means a trustee sale with no right of redemption afterward (Utah Code 57-1-28), and a lender can sue for a deficiency within three months of the sale, with any judgment capped using the home's fair market value (Utah Code 57-1-32). The steps are on Utah's trustee sale timeline.
Buying again with a VA loan after a short sale
VA's 2023 lender conference slides on credit underwriting list no waiting period after a short sale or deed in lieu, but say any late mortgage payments should be included in the credit review. After a foreclosure, the slides list two years, or one year with reestablished credit and a foreclosure outside the borrower's control. These slides are lender training, not the published lender handbook, so treat them as lender practice to confirm: an individual lender can set a longer wait. Restoring entitlement is a separate step. Other loan types are covered on waiting periods to buy after a short sale.
HOA dues, other liens and paid helpers on a VA short sale
HOA dues and other liens
If your Herriman home is in a homeowners association, unpaid dues do not disappear in a short sale. Under Utah Code 57-8a-301, an HOA has a lien for unpaid assessments, collection costs and certain fines, and that lien outranks most other liens apart from tax liens and a first or second mortgage recorded before the HOA's notice of lien. Ask the association early for a written payoff statement so the closing figures the servicer reviews are complete. A second mortgage or home equity line needs its own release, and you should ask that lender in writing whether it is forgiving its balance or only releasing the lien.
Paid helpers and rescue offers
Utah treats paid help that is said to prevent a foreclosure and involves transferring title to the home as foreclosure rescue, which is licensed real estate activity under Utah Code 61-2f-102. A Utah licensee may not have a short sale seller sign a document allowing the licensee to lien the property (Utah Admin. Code R162-2f-401b). Before paying anyone to deal with a VA servicer for you, check their license and talk to a HUD-approved housing counselor first.
Utah notes and what to confirm before you sign
Most Herriman VA loans are secured by a Utah trust deed. Once the trustee records a notice of default, Utah Code 57-1-24 requires at least three months before the notice of sale, and you can reinstate by paying the past-due amount and costs within three months of the notice (Utah Code 57-1-31). A short sale has to close before the trustee sale. If forgiven debt is taxable federally, Utah generally taxes it too, at a flat 4.45% for 2026.
Because VA's chapter text was read in draft, confirm with your servicer, in writing: that VA guarantees the loan, which options it has reviewed you for, VA's net value and how long it is valid, whether a partial claim needs VA pre-approval, whether the deficiency is waived, and the relocation amount. A HUD-approved housing counselor, found through the CFPB's Find a Housing Counselor tool, can go over the approval with you before you sign. This page explains VA's rules; it cannot promise that a servicer or VA will approve your sale.
Frequently asked questions
What is a VA compromise sale?
It is VA's older name for a short sale. VA's servicer rules now call it a short sale: a sale to a third party for less than you owe, with the servicer releasing its lien for the sale proceeds. The net proceeds must at least equal VA's net value for the home, and the seller receives no proceeds.
Does a VA short sale affect my VA entitlement?
It can. VA.gov says a short sale could result in a loss or reduction of your future home loan benefit, and that you will need to pay back the amount VA lost on the loan to restore it. Ask VA and your servicer what loss is expected before you accept an offer, and how restoration of entitlement works.
What are the details of the VA Partial Claim Program in 2026?
VA published the final policy June 1, 2026 and began accepting trial plan events June 15, 2026. VA covers your past-due amount as an interest-free balance repaid when the loan is paid off or the home is sold, after a three-month trial payment plan. Servicers have until November 28, 2026 to implement it, so ask yours whether it is ready.
What is a deed in lieu of foreclosure on a VA loan?
It is a voluntary transfer of the home to the servicer in exchange for release from all obligations under the mortgage. Under VA's 2026 servicer guidance, the loan must be insoluble, title must meet VA requirements, and you agree to vacate when the deed is recorded. Borrower occupants can receive $1,500 in relocation assistance.
How long after a VA short sale can you get another VA loan?
VA's 2023 lender training slides list no waiting period after a short sale, but late mortgage payments are part of the credit review, and individual lenders can set their own wait. Your available entitlement may also be reduced until VA's loss is repaid. Ask a VA lender to review your file before you plan a purchase.
How can I get VA debt from a short sale reduced or waived?
VA.gov says that after a short sale, deed in lieu or foreclosure, you need to pay back VA's loss to restore your full benefit. Ask VA directly about any amount it says you owe and the options for it, and get the servicer's approval letter in writing so you know whether the lender's own deficiency is waived.
Sources
- VA: Servicer Handbook M26-4, Chapter 5, Loss Mitigation (draft, 2026)
- VA.gov: VA help to avoid foreclosure
- VA Home Loans: VA Partial Claims Program and Loss Mitigation Waterfall FAQs for Servicers (2026)
- VA: Circular 26-25-2, VASP Program Wind Down (April 23, 2025)
- VA: Loan Guaranty Conference 2023, Credit Underwriting (slides)
- eCFR: 12 CFR 1024.41 Loss mitigation procedures
- Utah Legislature: Utah Code 78B-2-313
- Utah Legislature: Utah Code 57-1-24
- Utah Legislature: Utah Code 57-1-28
- Utah Legislature: Utah Code 57-1-31
- Utah Legislature: Utah Code 57-1-32
- Utah Legislature: Utah Code 59-10-104 (effective January 1, 2026)
- Utah Legislature: Utah Code 57-8a-301
- Utah Legislature: Utah Code 61-2f-102 (effective May 6, 2026)
- Cornell LII (Utah Admin. Code): R162-2f-401b
- CFPB: Find a housing counselor
- Zillow Research: Home Value Index, Herriman city (August 2026)