Options For Selling A House When You Owe Too Much
If you own a house and owe close to what it is worth, you might be afraid that you will owe money on it when you sell it. This is very possible, if you cannot sell your house for a high enough amount, but maybe you could sell it for an amount that will cover what you owe. If not, you could always consider selling it with a short sale or letting the lender foreclose on it. Here are several things to understand about these options.
What is a short sale?
A short sale is something that lenders may allow when homeowners are having trouble making payments on their homes. If you use a short sale, you will be allowed to sell your home for an amount that is less than the current balance owed on your mortgage. This offers a way out of a house without having to pay the difference; however, there is a chance you may owe some extra money if you do this.
You may have to pay the difference to your lender, which is called the deficit, but this is not always the case. You may also be responsible to claim the deficit amount on your taxes as income. This means you would pay higher taxes on your tax return. This option can also result in negative reporting on your credit report.
What happens when a lender forecloses?
A foreclosure occurs when a lender takes a home away from the borrower. The lender then sells the home to pay off the mortgage the borrower owed. With this option, you will be forced to evacuate before the house sells. You could also end up being responsible for the deficit when the lender sells the house, and you may also have to pay taxes on the deficit. A foreclosure will also affect your credit score in a negative way.
What else can you do?
These are two common options people use when they owe too much on their homes, but there is another option. You could meet with a real estate agent, such as Coldwell Banker Pro West, to find out if there is a chance you could sell your home for an amount that would cover what you owe. Keep in mind, when you sell a house through an agent you will have to pay a commission. Meeting with a real estate agent is a great way to find out if the agent thinks you could sell the house for a price that will cover the commission and the balance on your loan.