Sell My Home for Less tha I Own on the Mortgage

What happens if I sell my home for less than I owe on the mortgage?

2 Answers

If you sell your house for less than you owe a bank you will be held responsible for the balance left over. If you owe $100,000 and you sell for $95,000, you will be responsible for the difference of $5,000 at the current payment you are required to pay. If you cannot meet that payment, you will have to negotiate with the lender for something less. Most lenders will not take partial payments. They will take you to court for the remaining balance and this will affect your credit. Lenders will then charge you attorney fees involved with foreclosure, etc. These fees can be substantial. If you are prepared and you stay in contact with the lender, you may be able to work out a solution.

First, your lender would have to approve such a sale (normally called a short sale).  It is important that the terms of that agreement stipulate that they will not come after you for the difference (called a deficiency).  Whether or not they will waive their right to  legally pursue you for the deficiency will depend on several  things, including what kind of loan you have, whether or not they are likely to be able to collect on an eventual judgment, how much of the shortage will be covered by the insurance policy they have on the home, whether or not you had demonstrated that you had a hardship which made making  payments impossible.  In other words, there are a lot of variables.

Most important for you is that the agreement for short sale include a waiver of deficiency judgment and that you have this, in writing, prior to signing closing documents.