Selling a home can sometimes take just as long as buying a home. That’s because there are multiple steps that need to be taken and different people that get involved in the process. The entire process can easily take several months or more from start to finish.
Trying to sell a house that has an existing mortgage on it can extend the process even further. It can also be a deterrent to prospective buyers. Keep in mind the fact that if something happens to the house while you’re trying to sell it that you’re responsible for any repairs.
Real estate markets fluctuate, so it’s a good idea to stay informed about current trends. Selling a house in Texas is common, and with the right motivation and game plan, it doesn’t have to pose additional challenges.
Here are a few steps that you should take to make things easier for you:
1. Talk to your mortgage lender.
The very first thing that you should do is to have an in-depth conversation with your mortgage lender. Explain your intentions about selling your home. They can provide you with an updated loan balance.
You may want to review the mortgage contract to see if there are any penalties for paying off the mortgage early. The most common penalty in loan contracts is a pre-penalty fee.
These fees are usually around five percent or less of the total mortgage amount. These penalties are also usually only valid within the first two to five years of the mortgage.
2. Establish a reasonable sale price for your home.
After you’ve decided that you want to sell your home, you should schedule an appointment with your realtor. The agent should help you research current sale prices for other similar properties in your area. This can help you establish a realistic selling price for your home.
The sale price should factor in any closing costs that you may be responsible for, as well as the real estate agent’s commission from the sale and any taxes, transfer fees, or other charges that you may be expected to incur.
There should be enough remaining once those expenses have been deducted for you to set aside toward your next property or future investment.
3. Ask for an estimated settlement statement.
If you’re working with a realtor to sell your home, they will establish an escrow account for you. The title agent or escrow agent should be able to provide you with an estimated settlement statement.
This document should give you a good idea of what the closing costs and other related expenses that you would be liable for should be.
The estimate won’t be exact, but it should give you enough information to know how much money to set aside for the sale. It should also provide a better picture of how much you can expect to make after the sale has been completed. Once you have this information, it’s a good idea to start setting aside enough money for those costs as soon as possible.
If you’re trying to sell a home with negative equity (meaning that the remaining balance on the mortgage loan is greater than the home’s actual value), your home is considered to be “under water.”
Selling a home in this situation can a little tricky, but here are some courses of action that you can take:
1. Ask for a short sale.
A short sale is a transaction where the lender reduces the mortgage balance so that you can sell your home quicker. If you are thinking about a short sale, talk to your mortgage lender.
Most borrowers will usually only accept a short sale when they are concerned about the possibility of home owners foreclosing on their properties. You may have to provide proof that you are currently enduring financial hardship for them to approve a short sale.
Most short sales place a price on the home being sold that’s less than the current market value. This is done so that the house can be sold in a shorter period of time. Some lenders may require that the borrowers sign a promissory note for a short sale.
A promissory note is a promise by the borrower to continue making payments on the existing mortgage after the sale has been finalized. Short sales may help you sell your home faster, but they can also negatively affect your credit score.
2. You can pay the difference.
Another alternative is paying the difference out of your own pocket to the mortgage lender at closing. This payment would have to be in cash. This option is something that you should only think about if you have the cash available and you would have difficulties selling the home once market conditions have improved.
3. You can also postpone the sale, if necessary.
Selling a home in a depressed market can be difficult. Selling a home with an existing mortgage balance in a buyer’s market can be even worse. That’s why it may be necessary to delay the sale of your home until the market rebounds.
You’ll still have to live in your home and continue to make your monthly mortgage payments in the meantime. You could open your home to renters during this time and apply the rental income toward your mortgage.
Most home sales take anywhere from 30 to 60 days on average to complete. You’ll be responsible for the mortgage payments, utility bills and other maintenance and upkeep of the property during that time. To ensure that you don’t miss a payment, you can add the closing date to your calendar so that you know when your responsibility ends.
If you can pay your mortgage off before selling the home, it’s a good idea to do so. Just be aware of any pre-payment penalties or other fees that may be incurred. It may be expensive, but it can be a welcome relief, and it’s much better than having to take out a second mortgage.
Conclusion
Selling a home with an existing mortgage can be very stressful and frustrating. Once you’ve decided to sell, it’s important to sit down with your lender and your realtor.
They will listen to you and work with you to come up with a plan of action that will help you accomplish your goals. After the house is sold, you can move forward with the next chapter of your life.
Have Questions? Ask Rene!
