Selling but owe more than house is worth?

sydstclaire22

I want to sell my condo so FI and I can buy a house together. I purchased at the height of the market and nothing is selling anywhere close to what I still owe. I haven't contacted a realtor yet because I'm getting conflicting advice from everyone. I don't want to do a short sale because of what it can affect with us getting a new house, but I owe more than what it will sell for (I'm guessing by about 10k). Can I just pay the difference at closing oop or is that not a thing? Does it have to be a short sale?

MommyLiberty5013

As long as you pay the mortgage balance in full, the lender shouldn't care where your funds come from.

So when you get the money from the sale and it's in the escrow account, the bank where it's held wires it to the mortgage lender. At the same time, whatever bank is holding your remaining balance owed would need to wire those funds. The funds would need to be at the mortgage lender's payoff place at the same time so whatever payoff amount they gave you is met for that specific day.

So, no you don't need to do a short sale as long as you can payoff your mortgage loan in full. It's just going to require more work and probably a lot more paper work and organization.

sydstclaire22

Oh that's great, thank you! I'm assuming that would be the day of closing? So I would just have the wire ready for then at whatever amount would be leftover?

jtmh2012

The title company or closing attorney will walk you through all this.  But the short of is you will need to be able to pay the difference between what you still owe on the loan and the net proceeds that you get from the sale (ie. after realtor commissions, closing costs, etc).  So we're not talking loan value - list price.

The closing attorney/title company will require either a wire or a cashier's check from the bank.

MommyLiberty5013

sydstclaire22 said:

Oh that's great, thank you! I'm assuming that would be the day of closing? So I would just have the wire ready for then at whatever amount would be leftover?

When you pay off a mortgage loan, your title company calls the lender and gets a payoff amount for specific date. Letts say the pay off for Monday would be $102.35 (obviously making this up). On Monday your home sale closes and the buyers pay into the escrow account at closing $100.00. So, you still owe the lender $2.35. That $2.35 has to make it to the lender's payoff department on Monday by close of business. If it doesn't your payoff amount they quoted you is no longer valid.

julieanne912

Yes, what everyone else has said is correct.

I sold my condo in Chicago at a small loss, mainly due to the taxes that I had to credit to the buyer.  I had to bring a cashier's check to closing for the difference.  In my case, it was about $3,500.  The sales price was actually $10,000 more than what I owed, but after all the costs I was still short.

short+sassy

Another thought would be to rent your condo out until the market gets better.  Though that would depend on 1) if you could rent it out for enough to be worthwhile  2) Your lender for the new house would let you buy a house without selling the condo...ie your debt to income ratio is positive enough  3) You're okay with renting out your condo.