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January 18, 2024

Selling Your House When Behind On Payments

You could experience an income-impacting experience, such as losing your job and begin to find it difficult to keep up with your house payments. At this point, you could decide to sell depending on how much equity you have in the house. 

When selling your house in this kind of scenario, two things you especially want to do — maximize capital gains and minimize costs incurred during the sale process. So, how do you navigate selling your house when behind on payments?

How Do You Deal With Fees and Penalties?

When you’re behind on payments and looking to sell, you should absolutely try to avoid late fees and penalties because of just how steep they often are. At any point when you can, avoid having to pay late fees. 

When you begin to fall back on payments, your lender can tack on several late fees. This is typical of all mortgage lenders. To mitigate the effect this can have on your finances, review the timeline of your payments and note the coming deadlines. Also, read up on your lender’s rules concerning late payments. 

While you may not be able to avoid these fees altogether, it’s crucial that you play offense. Playing offense involves making minimum payments where possible to postpone a late fee successfully. What this does is that it allows you a bit more time to sell your house. 

When Should You Consider Loan Modification?

The only time you should consider a loan modification is if your financial projections show that you can still afford your mortgage if the interest rate is reduced. You would also need to show proof that you have a steady income coming in. 

This would involve contacting your bank or mortgage servicer to discuss and see whether they are open to modifying your loan. You would also need to present a ‘proof of hardship

’, which is evidence that you cannot afford your mortgage payment. 

After approval, you would have a trial period of 90 days or more, allowing you to make payments at the new, lower rate. If your payments are timely, the details of the loan modification will be finalized. 

You should note that there’s a negotiation process involved, and it can be especially protracted and difficult on occasion. You may also experience the loss of some of your paperwork by the bank or your mortgage services. All of these can culminate in a rather unpleasant experience. 

How to Sell Your House When Behind On Payments 

No doubt that you would like to wrap up your sale process as quickly as possible, especially since you would be working with a tight deadline. Overall, there are three selling options you can explore: 

  • Short sale 
  • Selling with a real estate agent 
  • Selling as-is 

Short Sale 

A short sale refers to a situation whereby a homeowner sells their houses back to the mortgage servicer at a lower price than what they owe. Most people who opt for a short sale do it when they are suddenly thrust into financial difficulty as a result of life situations like health issues, job loss, or other personal issues. 

Usually, the vast majority of lenders write off what’s left on the mortgage in order to avoid a lengthy foreclosure process. In certain cases, however, they could get a deficiency judgment that would mandate the homeowner to balance up what’s remaining. 

A typical short sale scenario usually involves a house with a lower value than what is left over on the mortgage balance. The homeowner would also have provided proof of hardship or proof of income/assets. 

There are two key things to note here: 

  • Certain lenders do not pay off the loan balance in a short sale. Before proceeding with it, you need to be sure you’re dealing with a lender who’s going to write off the unpaid balance. Outside of this, you would still be required to pay what’s left over after the sale.
  • Your credit score would take a major hit if you go the route of a short sale, and this can impact your choices of future housing. It’s ideal to have secured another housing before proceeding with the short sale. This is because you could experience extremes of credit score drop where you would no longer be eligible to finance another house or rent an apartment.

A short sale isn’t always instant, you may be required to wait several months while it’s being processed. 

Selling With a Real Estate Agent 

If you’re considering selling with a real estate agent, then there are three major things you should ensure:

  • Your house should be in excellent condition 
  • You should still be a long way from foreclosure 
  • You’re in a hot real estate market 

Selling your house with an agent is a tricky option because you’re racing against time. However, to allow your house a good chance on the market, you would still have to go through the standard appraisal process, inspections, improvements, and repairs. 

Note that some of these things cost money, which you may not have, and it takes time, which isn’t exactly on your side. Given that your house could potentially spend weeks or months on the market without an offer, you need sufficient time to make this sale. 

Recall that even after making the sale, you would still have to part with a percentage of your payment as agent compensation. In a situation where you’re potentially facing foreclosure, this may not be an ideal solution for you. 

Selling As-Is

Selling as-is is another alternative that you should consider, especially when you’re working with a short time frame. This option is especially ideal since you don’t have to spend anything at all. You don’t have to bother about repairs, improvements or curb appeal, nor do you need an agent. 

You can sell and close in as little as seven days and assess the cash you need to pay off your mortgage balance. Similarly, selling to a local cash buyer implies that you sell your house fast and without hassle.

Who’s going to buy? We can help out with that! We buy houses that need serious repairs or are in various other conditions. At dsouzahomebuyers, we can provide you with a cash offer for your house in no time! 

You don’t have to deal with any of this hassle. No need for repairs or renovations! 

Fill out this form to get the process started, and we could be closing in as few as 7 days! Remember, no fees, no commissions, no closing costs! 

If you have any other questions, definitely call us at (925) 503 8193. 

Final Thoughts 

Selling your house when behind on payment can be stressful, especially since you’re racing against time. As such, you want to opt for an alternative that provides a payment guarantee within this short time frame. Explore selling as-is if you need to sell your house fast.