Selling Your Home - Selling at a Loss
Can a home seller sell a home for less than its mortgage?
Yes,
in some case you can sell your home for less than what you still owe on
the mortgage, but this is complicated and depends on the lender. This
situation is known as a "short sale." Sometimes a lender will be willing
to split the difference between the sale price and loan amount, which
still must be paid. A short sale may be more complicated if the loan has
been sold to the secondary market because then the lender will have to
get permission from Freddie Mac, the two major secondary-market players.
If the loan was a low down payment mortgage with private mortgage
insurance, then the lender also must involve the mortgage insurance
company that insured the low-down loan.
When does foreclosure begin?
Lenders
will initiate foreclosure proceedings when borrowers become delinquent
in their mortgage obligations, usually after three payments are missed.
The lender will then notify the borrower in writing that he or she is in
default. The lender can request a trustee's sale or a judicial
foreclosure, in which the property is sold at public auction. A borrower
can cure the default by paying the overdue amount and the pending
payment after the notice of default is recorded, usually no later than a
few days before the property's sale. Some sales allow the successful
bidder to take possession immediately. If the former owner refuses to
vacate the premises, the court can issue an unlawful detainer that
allows the sheriff to come out and evict them. Borrowers should do
everything they can to avoid foreclosure, which is one of the most
damaging events that can occur in an individual's credit history.
