How Do I Sell My House When I Owe More Than It's Worth?

If you are worried about selling your house when you have no equity, you are not alone. There are thousands of home owners just like you all over the country. Some of them are looking to get out of their home because of a divorce, or job transfer. Others are desperate because they were speculating that they could buy 5 condos today, and sell them in 6 months for a 50% profit. Depending on which part of the country you live in, you might be feeling different levels of pain, so here are some ways to cope with the need to sell a property when you owe more than you can sell it for.

You can sell the property for lower than the existing balance, and bring money to closing to cover the difference. This is a painful realization, and for many, it just is not an option. Either you don't have the money, or you don't want to give it up.

Another option would be a deed in lieu of foreclosure. A deed-in-lieu is where the home owner signs over all rights to the home back to the mortgage company in lieu of allowing them to foreclose on the property. Be aware that this is reflected on your credit as a foreclosure, and the only difference is that you may have less headache and fewer collection calls. The only possible upside to this option is to work it out with the lender that they accept this deed without recourse or further collection activity. The term "without recourse" would be very important in working this out with the mortgage company as it is common practice to sell the property at auction, and come after the original home owner for the deficiency balance after the sale. This is commonly tens of thousands of dollars, so "without recourse" is very important.

A short sale is often used to avoid foreclosure in the event that you owe more than the home is worth. This is when the bank agrees to accept the lower purchase price as payment in full in an effort to avoid foreclosure. Since foreclosure is costly for the bank as well as the homeowner, it is relatively common for banks and mortgage companies to accept a short sale if the offer is reasonable. A short sale often takes weeks for the bank to approve, so you don't need to give the impression to the buyer making the offer that they can get their offer approved within 48 hours. It just won't happen.

A short sale may not be for everyone. If you are current on your mortgage, there may be other ways to recover (refinance, market price sale, etc.). But, if you are in default or have been served your notice of intent to foreclose, you will have to try to sell it short or be stuck with a foreclosure.

There are different options for your individual situation. To find out more about what is best for you, go to www.PreForeclosureFSBO.com . There is more detailed information in their resources section that will help you decide what is right for you based on the details of your specific situation.

Steve Russell is the Co-Founder of REO In Motion, LLC. (a Florida based internet marketing firm), and a contributing editor for http://www.PreForeclosureFSBO.com . His background consists of over 10 years in the retail and wholesale mortgage industry, with a specialty in Short Sales.

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