Home Ownership and Permanent Change of Station (PCS)
Home Ownership and Permanent Change of Station (PCS).
Members of the armed forces learn very early in their careers that being flexible is an important skill. When orders are handed down, they will be expected to cooperate and make adjustments quickly. One of the major adjustments that this group faces is called PCS or permanent change of station. Essentially, this is a relocation, and for those who own a home there can be quite a few complications. Here are a few simple solutions and tips that can make these change easier to handle.
The main issue with home ownership and PCS is something like this: You own a home and are forced to move somewhere new, where you must decide to rent, own or (if available) live in the barracks. This is complicated further by the following considerations:
- How much equity do you have in the home?
- How did you time the market when you purchased (can you sell the home for close to what you paid for it)?
- How quickly can you sell the home?
- If you rented the home, would rent cover your mortgage payment?
- Do you have a family, and are they moving with you or staying in the home?
We certainly can’t talk through every single possibility here, but we can give some broad advice that will apply to most of these situations.
Moving when You have a Family
Moving without your family can be much more complicated and expensive. If you rent or own in the new location, you will essentially be running two households, which can be quite costly. Your best two options are typically to either move the family to the new location or request to live in the barracks, qualifying as a geographic bachelor.
Selling or Renting Your Old Home
You will more than likely want to sell your old home, but based on a variety of factors this may not be easy and could take several months. You should consider renting the home in the short-term to provide income while the house sells. You may consider refinancing your home first, before renting.
That might be best in some cases, but not if you have to pay a lot of closing costs on the refinance. The better choice is to work with a local realtor to run comps in your area. These comps will not only help determine your listing price, but they will also help give you realistic expectations of how long it will take to sell the house.
Another point about renting is that if you move away, you won’t be able to be the active landlord. You would likely need to hire a property manager, which could leave you with very little “profit” on the rent payments coming in. Depending on your particular financial situation, this could still offer you a good return.
Buying High and Selling Low
One common situation is where a family bought a house at the peak of the market and now needs to sell, at a time when the market is down. This is a reminder of the tough situations that servicemen and women are put in, because they could not really “choose” when they purchased the home.
In these situations, depending on severity, people can look into the HAMP or HARP programs, although they are designed for struggling homeowners and may not be easy to qualify for.
Complications with Renting
The fact that homeowners will likely need to pay for some form of property management, renting while on PCS might not be a good solution. Again, it can be helpful to work with a realtor to help identify how much the property is worth in rent, and you might also consider contacting a financial professional such as those available via the Armed Forces Community Service to ensure that your financial plan is sound.
Should You Buy at All?
Serving in the military is often synonymous with moving multiple times. When you know that you will face this uncertainty, you might avoid buying altogether. If you do buy, you need to rely on a multitude of factors, some of which are in your control and some which are not (like the timing of the market). You also need to have an established emergency savings and need to do your due diligence. There are other complications to consider, too, like the potential loss of your spouse’s income when you move, changes to Basic Allowance for Housing (BAH), and others.
Long story short, it’s a serious decision that needs to be planned thoroughly. Give me a call at 757-816-1676 and I will be happy to assist you with this planning process.