Despite the downsides, the reality is that sometimes you have to sell your home even in a bad housing market. One result of this mark is the increasing popularity of the short sale.
What is a short sale? Well, there are two applications for the definition. In the first, you are selling your home for less than you paid or for less than what you have remaining on your mortgage. You are in negative equity. It doesn’t seem fair, but if you purchased your home in the last two to five years, and need to sell it today, this negative equity may be a reality for you. I know one family who purchased a town home in Radnor, PA for $230,000. They made $20,000 in improvements and upgrades for a total investment of $250,00. They were hoping to sell their home for at least $290,000. The advice from their real estate agent? Their home should be listed at $219,000 and would probably sell for less.
While this may sting a great deal, it may be reality if you really need to sell that home. You may find some help making up the difference, for example, if you are relocating for a new job or a transfer, your company may be willing to make up the difference between the sale price and your mortgage.
In the second application, you may be able to negotiate with your lender to sell your home and pay less than your remaining mortgage balance to satisfy the loan. In other words, if you owe $200,000 on your mortgage and can sell your home for $150,000, the bank may forgive the balance. You won’t make a profit, but at least you won’t owe anything either. Don’t get your hopes up too high. Lenders usually only agree to such terms when you are near foreclosure, and even then they may refuse. If you think you might want to go this route, it is best to consult a lawyer that is versed in foreclosures and bankruptcy. You also want to be very persistent with the lender about this option.
Mary Ann Romans writes about everything related to saving money in the Frugal Blog, technology in the Computing Blog, and creating a home in the Home Blog. You can read more of her articles by clicking here.
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