Selling your home can become an overwhelming process for some, especially if they are incurring an inevitable loss on the sale. There are cases where the home owner has to sell his or her home for less than what he or she still owes on the mortgage; it is commonly known as a short sale. Sometimes a short sale becomes necessary for certain home owners, who perhaps are short on cash to repay the mortgage lender.
On the other hand, lenders might also initiate something known as a foreclosure, where the borrower has missed several of his or her mortgage payments consecutively. The property would then be sold at an auction. However, done under the right circumstances it is possible for one to minimize the losses and make a quick sale. Here are a few tips that you need to consider if you are selling your home at a loss.
- Short sale vs foreclosure
If you are selling your home for a loss, you might be experiencing a short sale or a foreclosure. Many real estate agents would advise you to go for a short sale, as a foreclosure will destroy your credit ratings to a greater extent and diminish your prospects of buying another home on mortgage. However, there might be circumstances where it might not be possible to opt for the short sale, for instance when the bank does not accept your short sale offer.
- Determine what you owe
Before you make the decision of selling your property for a loss, it is pertinent that you determine the full amount you owe on your mortgage. You can check your recent statement from the bank or ask your lender to send you a payout quote. For those who have multiple mortgages on a property, it is necessary to add up all of them. This will help you calculate what you owe and how you can plan ahead to minimize your losses.
- Look into other refinancing programs
It is always best to look for other alternatives before making a final decision. There are other refinancing programs, especially those by the government that can help you in paying your mortgage on time and preventing a loss in your house sale. Home Affordable Modification Program helps homeowners who are behind on their loan repayments by allowing to get a manageable monthly payment on their existing loans. Moreover, the Home Affordable Refinance Program also gives homeowners a chance to refinance. However, to benefit from these supporting organizations, it is important for the home owners in crisis to act fast.
- Tax consideration
You will not incur any tax benefit by selling your house at a loss, but since there was no capital gain from the sale nothing would be deducted as well. However, if you were using your house as a rental property or for business use for more than a year, loss incurred from the sale is deductible.
Therefore, all those who are selling their home at a loss or are concerned about paying their next mortgage payments should keep in mind the tips mentioned above.
