How to Sell a Negative Equity Home
A home with negative equity is worth less than the balance on the mortgage. For example, your house was purchased for $125,000 and has a current mortgage balance of $105,000. However, property values in your neighborhood have plummeted, leaving the home with a current value of just $85,000 --- $20,000 less than the mortgage balance. This presents two options for selling: find a buyer willing to pay more than the market value, or ask your lender to allow a so-called short sale. A short sale lets you sell the house for less than the amount owed to the lender, with the lender usually absorbing the loss.
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Instructions
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Hire a real estate agent with experience in short sales. The agent should have superior negotiating skills, because lenders do not have to agree to a short sale. The lender may not agree to a short sale unless you are virtually on the brink of foreclosure. Lenders aren't interested in bailing out people who have the ability to pay but simply want out of their negative equity mortgages.
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Share details of your mortgage situation with the real estate agent. If your mortgage is current and your finances are fine, you have virtually no chance of being approved for a short sale through the lender. Instead, place the house on the market and be prepared to pay any remaining balance yourself, if you can afford to.
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Authorize the real estate agent to contact your lender directly about a possible short sale if you have fallen behind in your payments and are facing foreclosure. Also, seek advice from a housing counselor with experience in foreclosure prevention. The counselor can suggest options other than a short sale, such as special hardship plans that will give you time to catch up on your mortgage and stay in your house until property values improve. Find a housing counselor in your area by checking the U.S. Department of Housing and Urban Development's website (see Resource).
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Follow advice from the real estate agent as you try to convince the lender to approve a short sale, while also considering advice from the housing counselor as an alternative plan.
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