What Happens If Sellers Cannot Sell Their Homes?
- There are many reasons why a house might not sell quickly. One common problem is when a seller owes more than a home is worth. A home seller may owe $200,000 on his mortgage but an appraiser may determine that the property is only worth $180,000. Selling the property will require the buyer to provide a sizable down payment to compensate for the difference or the home seller paying money to the mortgage lender out of pocket. Other reasons may include huge competition, where there's an increase in the number of homes for sale in a single neighborhood, or stricter mortgage lender requirements that stops many from qualifying for a home loan.
- Real estate markets occasionally shift and whereas you may owe more than your property's worth now, the property may begin to increase in value in the coming years. Until then, postpone selling the home and find renters to move into the property and pay the mortgage. With renters in the home, you're free to move to another property. You can revisit the idea of selling the home once you pay down the mortgage or the property gains additional equity.
- The possibility of a mortgage foreclosure is real for sellers who desperately need to sell their homes to remove the mortgage debt. Being behind on home loan payments not only lowers your FICO credit score, but makes you risk losing the property to the bank. Foreclosures can hurt future rental and buying options. Plus, the foreclosure will stay on your credit report for seven years.
- Mortgage lenders typically extend mortgage help to borrowers who cannot sell their homes. This help comes in many forms such as a short sale, loan modification or deed in lieu. Each provision varies slightly and lenders can help you decide the best course of action. A short sale offers mortgage debt forgiveness and lets you reduce the sale price of your home for a faster sale. Modification lowers your interest rate and payment and gives you the option of staying in the property. But if your home doesn't sale after 90 days, the lender may agree to take back the home and remove your name from the home loan with a deed in lieu of foreclosure.