Selling at a Loss

Selling at a Loss

Can a home seller sell a home for less than its mortgage?

Yes! In some case you can sell your home for less than what you still owe on the mortgage. Just know it can be complicated and depends on the lender. The situation is known as a “short sale”. Sometimes a lender will be willing to split the difference between the sale price and loan amount. Short sales are more complicated when the loan has been sold to the secondary market. Then the lender will have to get permission from Freddie Mac, the two major secondary-market players. The lender must involve the insurance company that insured loan if it was a low down payment mortgage with private insurance.

When does foreclosure begin?

Lenders will initiate foreclosure proceedings when borrowers become delinquent in their mortgage obligations after 3 missed payments. The lender will then notify the borrower in writing that he or she is in default. The lender can request a trustee’s sale or a judicial foreclosure, in which the property is sold at public auction. After the notice is recorded, a borrower can cure the default by paying the overdue amount and pending payment . Usually, it is no later than a few days before the property’s sale. Some sales allow the successful bidder to take possession immediately. If the former owner refuses to vacate the premises, the court can issue an unlawful detainer. This allows the sheriff to come out and evict them. Borrowers should do everything they can to avoid foreclosure. It is one of the most damaging events that can occur in an individual’s credit history.

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