How Do You Sell Your Home That Is Worth Less Than The Mortgage? 


 In Blog, Real Estate Questions

If you are considering selling your house yet owe more on your mortgage loan than the home is actually worth, you should know you are not alone.  Plenty of people end up owing more than their home’s worth and ultimately decide to sell.  It is possible to sell such an “underwater” home.   Though it will be difficult to make a profit or even break even on an underwater home, you can still exit this arrangement as long as you can find a buyer or can convince the lender to give the go-ahead on a short sale. 

 

 

Consider a Short Sale

If you can convince the lender to allow a short sale, you can sell your home even if it is worth less than the mortgage.  In a short sale, the mortgage lender approves the sale of the home for less money than is owed.  This strategy has the potential to allow for a rapid home sale as it can be priced for less than what is owed or even less than comparable homes.  The lender is the party that ultimately takes the financial loss.  However, short sales often prove challenging.  It is possible the lending institution will not approve an offer even if you consider it an acceptable figure.  If the lender denies the offer, the sale will not be processed.  Sadly, there are some lending institutions that refuse to even consider a short sale. 

 

If your lender agrees to a short sale, your credit score will likely fall.  It is also important to note the buyer or the seller must make up the difference between the home’s sale price and the amount still owed.  Most home buyers will not pay more than market value for a house so it is almost always the seller who makes up the difference.  The lending institution does not care where the extra funds come from.  The lender simply desires to be made whole when the home sale closes.

 

 

 

Sell the Home on Your Own

There is no harm in listing your home at an elevated price to test the market.  If your local real estate market is hot, you just might get more than anticipated for your underwater home.  It is even possible the sale price will cover all or some of the money owed on the mortgage.  Consider listing the home for sale on your own as opposed to leaning on a real estate agent to list and sell the home.  You can put the savings from such a DIY (do it yourself) sale toward the money owed on the home. 

 

 

When in Doubt, Contact Your Lender

Do not remain quiet and hope for the best!  This is a time to speak up and interact with the lending institution.  A simple phone call really does have the potential to make life easier for you and the lender.  Reach out to the lending institution to determine if there are mortgage modification plans available.  The lender might be able to refinance the loan or modify its terms by providing a lower interest rate.

 

Some lenders have plans that adjust the loan terms.  You might even be able to obtain an unsecured loan to cover the difference between what you owe and the value of your home.  As noted above, if you insist on selling, there is likely a way.  Discuss the option of a short sale with your lender and you just might be able to get out of this predicament and transition to new digs sooner than expected.

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