Sometimes life changes before your home equity has had time to catch up. A job relocation, change in finances, growing family, divorce, or another unexpected circumstance may mean you need to move sooner than you planned.
But what happens when you look at what you owe on your mortgage and worry that selling your home may not leave you with enough money to cover the costs of the sale?
You may have more options than you think. Don’t assume you can’t sell, or that a short sale is your only choice. The first step is understanding the numbers and exploring which solutions may fit your situation.
Start by Understanding What Your Home is Worth
If you’re concerned about having little or no equity, start with three important numbers:
- your home’s current market value (get a free CMA)
- your mortgage payoff
- estimated costs associated with selling
Online home estimates can provide a starting point, but they don’t always reflect current market conditions, your home’s condition, recent comparable sales, or the features that could influence what a buyer may be willing to pay.
A realistic market analysis can help determine whether you have enough equity for a traditional sale and, if not, how large the potential financial gap may be. You don’t want to make a major decision based on an assumption that you’re underwater when you haven’t seen the complete picture.
What If You Don’t Have Enough Equity to Sell?
Having little or no equity doesn’t automatically mean you’re out of options. Every homeowner’s circumstances are different, and depending on your finances, timeline, mortgage, and reason for moving, there may be several paths worth exploring.
A Traditional Home Sale
Sometimes the numbers are closer than homeowners expect. If the expected sales price covers the mortgage payoff and selling expenses, a traditional sale may still be possible, even if you walk away with less equity than you originally anticipated.
Bringing Money to Closing
If there is a relatively small gap between your expected proceeds and the amount needed to close, bringing funds to the closing table may be an option. That won’t make sense for everyone, but understanding the actual amount of the shortfall can help you decide whether it’s realistic.
Renting the Home
If you don’t have to sell immediately, temporarily turning the property into a rental may give you more time before selling. There are additional considerations with becoming a landlord, including the expected rent, mortgage payment, maintenance, insurance, vacancies, and property management. The numbers need to make sense for your particular situation.
Investor or Direct Sale Options
Depending on the property and the homeowner’s circumstances, selling to an investor or exploring another direct-sale option may be worth considering. It’s important to understand what you’re giving up in exchange for convenience or a faster sale and compare those options with what you could realistically net through a traditional sale.
Exploring Hardship Options With Your Mortgage Lender
If financial hardship is affecting your ability to keep the home or make your mortgage payments, your lender may have programs or solutions available. What may be available will depend on your loan, financial circumstances, and reason for needing to move.
Our team can help you understand where these options may fit into the bigger picture and assist with communication with your lender when appropriate.
A Short Sale
If your home cannot reasonably be sold for enough to cover the mortgage payoff and selling costs, a short sale may be another option to explore. With a short sale, the lender may agree to accept less than the full amount owed, but lender approval is required and not every situation will qualify.
Our team can help you determine whether a short sale may make sense after reviewing your home’s value, what you owe, and other potential solutions.
You Don’t Have to Figure Out Your Options Alone
If you need to move but aren’t sure whether you have enough equity to sell, start by understanding where you actually stand. The Schrader Group can help you review your home’s current market value, estimate your potential proceeds, and explore the options that may be available based on your circumstances. Contact our team to start the conversation and build a plan for your next move.
Want to Learn More About Selling with Little or No Equity?
Watch our full video as Lauren and Raul from The Schrader Group discuss the options that may be available when you need to move but are concerned you don’t have enough equity to sell. You’ll learn where to start, what solutions may be worth exploring, and when a short sale could potentially make sense.