How to sell your home when you owe more then it’s worth
Purchasing a home is usually a good long term investment because a property has the advantage of appreciating in value over a given time. Unfortunately, sometimes the property depreciates as a result of several reasons. You might, therefore, find your self in a tricky situation where you owe more than the actual value of the house.
You might choose the option of waiting for the market to improve before putting up your house for sale to get a better value. Unfortunately, such an opportunity does not always present itself and if it does, then you end up waiting for several years which can be frustrating.
Are there better options?
There are numerous options that you can consider to ensure that you get the most out of such a situation.
1. Short sale
Short sale entails proving to a given lender your inability of settling your monthly mortgage fees and hence requesting them to approve the sale which is normally less than the existing mortgage balance.
In the event that the short sale goes through, then the lender will cancel off the pending balance. The short sale process can sometimes be complicated and unpredictable because lenders also aim at making profits. This often leads to an unsuccessful process despite you and the lender coming to an agreement. It is important to note that listing your property as a short sale does not guarantee its acceptance by the lender. Another fall back to consider is the effect that the process will have on your credit score hence hindering you from getting a loan in the foreseeable future.
Foreclosure should be your last resort and only considered when you have no other choice. Foreclosure involves your lender having a claim to your house as a result of failure to clear outstanding payments. The process involves eviction as your credit score hits the rocks making it very difficult to acquire a home loan for up to 7 years.
3. Enlisting the house using a real estate agency
Another option is listing your house with a real estate agency though it might take time before you get a potential buyer. This option has two downsides, the first disadvantage is that you will be unable to generate the amount of money that you owe on your house. Another disadvantage is that you are required to keep the house in good condition by catering for repairs and remodeling which can be costly. If you do manage to find a buyer then you will have to clear payments in terms of agent fees typically gong at 6% of the total sale.
4. Selling to a direct buyer
Selling directly to a buyer is fast and often easy when you have to sell a home under such conditions. You can avoid lengthy processes by arriving at an agreement with the buyer hence closing your home within 7 days. The upside of this option is that there are no commissions or repairs required. A reliable buyer will usually be responsible for covering all related costs including repairs and closing fees.
5. Process of selling to a cash buyer
You can start by contacting the buyer by providing some basic information about your home then wait for feedback to meet with a professional buyer regarding the transfer of ownership. Usually, cash buyers will want your home as-is and this can be a good thing as you don’t have to buy for costly repairs. We asked Richard Statham with Sell My Home Fast NYC, cash buyers in the Bronx, what questions to ask when going into a cash deal.
“When going into a cash deal for your home, it’s important to make sure that the buyer first off has the money to actually close. Make sure you can see proof of funds before beginning negotiations. Next, make sure that they put down sizeable earnest money. If they are going to walk away from the home you should be at least monetarily covered. This is also a great tool to help discourage wholesalers.”
If you want to sell your home but feel like you are too far behind just remember you do have options. Be sure to do your research before choosing your plan of action.