Can I Sell My House If I Still Owe Money On It?
Can I sell my house if I owe money on it? We often hear from homeowners who owe money on their mortgages or property taxes. We also hear from homeowners with a lien on their home, often through no fault of their own. This is a very stressful situation, especially if other circumstances require the homeowner to sell the home in a timely fashion.
These homeowners need to sell, but are afraid these debts are going to keep them from doing so. Fortunately, we’ve been able to help many people who are in all three situations.
Here are some of the most common scenarios and how to handle each one.
Sell a House With a Mortgage
Don’t panic. People sell homes with mortgages all the time.
If you have a mortgage you can still sell your home the traditional way. However, if you sell your home for less than the amount you owe you may end up writing a check to cover the difference, since listing a house can be costly. Repairs, staying on the market, and paying realtor fees all cost money. It’s important to study the current real estate market so you can get a realistic picture of what to expect.
Most people sell their homes for enough money to pay off the mortgage. Many can also cover a new down payment on a new home.
Selling a House When Facing Foreclosure
However, things can get more complex when you are in danger of foreclosure.
There are two reasons people go into foreclosure.
One reason is they can’t pay their mortgages. The other reason is they can’t pay their property taxes.
At this point, selling your home becomes very tricky because you’re essentially in a race against time. And if you’re upside down in your mortgage you may find yourself having to turn to the bank to ask for a short sale.
Banks are unlikely to agree fast enough unless it’s a cash sale. When a short sale is financed, two different banks must coordinate and approve the transaction. They may not make up their mind to do so before your deadline runs out.
If you find yourself in this situation, a cash offer from a reputable investor like Dan Buys Houses can be very helpful. We can typically get the entire sale finished within ten to thirty days.
Do You Have a Lien On Your House?
You cannot sell your home on the open market with a lien on it.
That’s the definition of a lien. Before you can list your house on the MLS service and get a realtor, you’d have to pay off the lien.
If you don’t have the money to do that then you’ll need to look for another solution.
Again, we work with this situation quite often. We factor the cost of clearing the lien into our offer and then work with the lien holder to get the title clean once more. From there, you’ll have the legal right to sell the home to us.
However, you also will no longer be responsible for whatever debt caused the lien to be applied in the first place. Since that lien could have been applied through no fault of your own (i.e. if a contractor of yours failed to pay his subcontractors and left you holding the bag) this can come as a massive relief.
Can You Sell Your House When You Owe the IRS
If you know an IRS lien is coming then you might want to sell your home fast.
An IRS lien shows up on your credit report. Though the IRS cannot force the sale of your home, their liens can have a greater impact on your life than your average roofer lien.
Selling your house isn’t the only option, of course. You can set up an installment plan if you can’t pay the amount in full. As long as you are faithful to the installment plan, the IRS will typically leave you alone and may even withdraw the lien.
However, if you don’t feel you can do that selling the property quickly may be your best option. You’ll pay off the IRS and get a fresh start, one which may allow you to adjust your expenses so that you don’t end up in trouble with the IRS again.
The Flow of Money In a Real Estate Closing
Remember, money flows to the people you owe before it flows to you.
One of the things a title company does at closing is to issue funds to all of the stakeholders. So let’s say we bought an $190,000 house with a $90,000 mortgage on it. The title company would wire $90,000 directly to the mortgage company. They’d then wire the remainder to you, minus closing costs and other fees which might be associated with the sale.
In the case of a lien we have to work with you to get the lien cleared first before the sale can proceed. We will factor this into our offer when we give it to you. We are also happy to answer any questions you might have about the process at that time.
We’re Here to Help
If you are uncertain about what you need to do in order to sell your home or if you feel like you are facing obstacles to your sale then give us a call. We routinely answer seller questions. We do not require you to sell your house to us just to perform this basic courtesy on your behalf. We’re here to help regardless.