Did you recently find out that the value of your house is less than the amount you owe on your mortgage? This is known as an underwater house. Are you looking to sell your home very soon?
When it comes to the Wisconsin real estate market, you probably think it’s nearly impossible to sell an underwater home for a better price and pay off your mortgage.
It might be harder to find a buyer who will offer you a larger value than the home is worth. However, our guide will teach you exactly how to sell a house underwater and other strategies you can take.
You will learn about the strategic short sale, how to transfer a deed to avoid foreclosure, and how to refinance your mortgage. We will cover all the essential steps regarding how to sell a house underwater.
Can You Sell a House That’s Underwater?
Selling a house that’s underwater in Wisconsin is not a simple process, but it is possible. You might want to consider working with companies that buy houses in Wisconsin. What steps should you take to sell a house that’s underwater?
You can start by trying to refinance your mortgage loan. However, most lenders need you to have equity in the property before you can refinance. Equity means you need to have some ownership of your property. If you have paid off and own at least part of the property, it is much easier to refinance the loan.
Another option is not to sell your home just yet, and continue to pay it off until you’ve paid off enough so that it is no longer considered underwater. At that point, you can start selling your home.
You can also sell the home for a value less than your mortgage and use some of your savings to pay off the rest of the mortgage.
What You Need to Know About Selling a House That’s Underwater
There are multiple aspects you need to know about selling a house that’s underwater in Wisconsin or elsewhere. You might need to seek cash home buyers in Glendale. Furthermore, you’ll have the option to sell your house while covering whatever you don’t make in the sale with cash already under your belt.
Essentially, this means you need to partner with a great real estate agent, but you will need to cover the fees of the real estate agent and closing costs. A top real estate agent can help determine an effective listing price somewhat below market value, improve your home’s marketability with minor changes, and market to home buyers.
These real estate agents know all about selling houses as is for cash and how to sell your house with a code violation. There are also essential strategies that you’ll want to consider when selling your house that’s underwater.
These processes include strategic short sale, solutions for underwater mortgages, transferring the deed in lieu of foreclosure, and refinancing your mortgage. You can view the tips for selling a house with an underwater mortgage below.
The Strategic Short Sale
Are you thinking, ‘how can I get someone to buy my house in Milwaukee even if it has an underwater mortgage?’ Well, you can sell underwater homes in Wisconsin via a strategic short sale.
The strategic short sale does not require a hardship and is more outlined and planned according to regulatory requirements. Furthermore, a short sale bank can approve the strategic short sale. At times, the home seller pays a large cash stimulus to the bank in exchange for the strategic short sale. However, this only rarely happens.
Many home sellers who choose the strategic short sale do so because the value of their home is usually less than their final mortgage payments. This particular process is to help home sellers avoid foreclosure.
When choosing to go this route, a home seller needs to create an effective hardship letter. You’ll also need to hire a short sale listing agent, and you might want to speak with a real estate lawyer experienced in strategic short sales.
You’ll need to set your listing price at a similar rate to other parallel properties. Fill out all the paperwork necessary for the short sale bank. Taking these steps can help you properly sell a home with an underwater mortgage.
Underwater Mortgages
By now, you must have heard real estate agents use the term underwater mortgage. What exactly is an underwater mortgage? If your house and other properties in your neighborhood have dropped in value and your home is worth less than the money you owe on your mortgage, it is called an underwater mortgage.
Essentially, this means your home has a higher principal than what it is currently worth, according to Rocket Mortgage. This may be common if property values in your area have fallen drastically.
There are multiple ways that your property can face underwater mortgages. Missed payments, especially on your interest, can lead to an underwater mortgage on your home. A reduction in property values can also bring about problems and lead you to have an underwater mortgage.
Solutions for an Underwater Mortgage
You’ll be glad to learn that there are solutions you can take part in to overcome having an underwater mortgage. For example, you can pursue the Freddie Mac Enhanced Relief RefinanceSM program to decrease your overall mortgage rate or transform your interest.
You can also consider the Enhanced Relief Refinance from Fannie Mae loans, which will transform the terms of your loan. Therefore, even if you have an underwater mortgage, certain programs can help you overcome the issues of a low property value and a high mortgage rate.
Transferring Deed in Lieu to Avoid Foreclosure
When a homeowner is attempting to avoid foreclosure and isn’t able to sell their property, then one option is to transfer the deed in lieu of foreclosure. This process requires the homeowner to give the mortgage lender or bank the deed to their house.
This will ensure that foreclosure does not show up on the credit report of the homeowner. Foreclosures are harmful on a credit report and make it impossible for anyone to purchase another property for many years.
When the deed is transferred over to the bank, the lender releases the lien on the entire property. Then, the lender can gain back some of the losses from the property while the homeowner does not have to fear foreclosure.
Many homeowners seek to transfer their deed in lieu to keep their house from foreclosure when their mortgage is underwater. So, if your mortgage is underwater and you owe more on your property than its value, you might want to consider transferring the deed in lieu to avoid foreclosing on the home.
Refinancing your Mortgage
Another great option to take when your mortgage isn’t looking good is to refinance your mortgage. But what does this mean?
Essentially, refinancing a mortgage means changing your old mortgage rates and structure in favor of a new one. You might even be able to refinance a mortgage to gain a better balance.
When this occurs, your lender will pay off the old mortgage with the new one. The majority of homeowners who try to refinance their mortgage do so to lower their interest rate or reduce the payment terms.
There are multiple strategies you can take when refinancing your mortgage, such as a rate and term refinance or a cash-out refinance. Rate and term refinancing involves getting a mortgage with a reduced interest rate and potentially a shorter payment term. You could potentially reduce a 30-year mortgage to a 15-year mortgage.
The other option is a cash-out refinance, which involves refinancing as much as 80 percent of the value of the home for straight cash. For example, let’s say your home is valued at $200,000, and you still owe $120,000 on it. In a cash-out refinance, your bank or lender may give you a reduction of $40,000, which means you’ll owe a total of $80,000 on your new mortgage.
How to Sell a House Underwater
If you’re still wondering how to sell a house with an underwater mortgage, this guide should have provided you with most of the details. However, there are some other steps you can take.
You might want to consider an exchange of security, according to The Balance. This means using the equity from a second property to cover the difference on the home with an underwater mortgage.
However, this can only occur if you have a second property that you own and no longer have any loans on it. Your lender may be able to exchange the security from the underwater property to the home with no mortgage.
Therefore, if you have an underwater mortgage and a second home, you can speak to your lender to see if an exchange of security is possible.
Conclusion
This guide should have given you all the information you need to sell a house with an underwater mortgage. You can consider taking part in a strategic short sale and possibly refinance your mortgage before the sale. Using these solutions, you’ll soon sell your home and start moving into a new location.
