"Homeowners often ask, "Can I sell my house for less than I owe?" The short answer is yes, but the process can be complicated, and the financial consequences vary depending on your situation. Essentially, you have two primary options. You can either bring money to the table at closing to pay the difference yourself, or you can request what's known as a short sale, where the lender agrees to forgive the unpaid balance."
"When you owe more on your mortgage than your home is currently worth, you're in what's called negative equity . This situation is also referred to as being upside down on a mortgage. For example, if your outstanding loan balance is $300,000 but your home appraises for only $250,000, you're in negative equity by $50,000. Negative equity can happen for a variety of reasons:"
Selling a home can be complicated when the mortgage exceeds the property's market value. Homeowners can address the shortfall by paying the difference at closing or pursuing a lender-approved short sale that forgives the unpaid balance. Negative equity occurs when outstanding loan balance exceeds appraised value, creating deficits (e.g., $300,000 loan against $250,000 appraisal equals $50,000 negative equity). Causes include falling local markets, buying at market peaks, low down payments, or refinancing in other debts. Negative equity limits options and requires careful planning and negotiation, especially when life events like relocation or divorce create urgency to sell before markets recover.
Read at Redfin | Real Estate Tips for Home Buying, Selling & More
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