A challenging real estate market means home sellers must make tough choices, and selling a home at a loss can be one of the most difficult. Declining home values mean a loss for some homeowners who purchased houses at the top of the real estate market and now must sell at a bargain price, sometimes for less than what is owed. The sale at a loss, however, also includes a few concrete advantages.
#1 Personal Control
The major advantage to selling a home at a loss is avoiding foreclosure when the homeowners no longer have the funds to make the mortgage payments, but other advantages deal with the more personal aspects. Researchers at the Urban Institute noted in a study published in 2009 that foreclosures impact "virtually all aspects" of the family's well-being. In selling a house, even at a loss, the family retains an element of personal control and is able to manage the time when the family moves from the home into new lodging. Home closings during summer breaks or holidays make moving easier on school-age children.
#2 Removing Mortgage Payment Pressure
Rather than contributing funds into a declining investment, selling a home at a loss removes the necessity to make the monthly mortgage payments. The seller's mortgage lender, according to the "New York Times," occasionally offers mortgage modification programs to forgive the difference between the sale price and the balance owed or allows the seller to take a personal loan for the difference in the final sale price and the original mortgage amount. This new loan offers the original homeowner the option to pay over a longer period and in amounts typically much lower than the payment on the original loan, since the loan covers only the loss on the home not the entire mortgage amount.
#3 Maintaining Credit Rating
Another obvious advantage to selling a home at a loss involves maintaining the creditworthiness of the homeowner. The experience of losing the equity in your home involves disappointment, but selling, even at a loss, allows the seller to keep his credit report clear from a short sale, where the bank accepts a lower repayment for the original mortgage, or a foreclosure. Credit agencies do record short sales on the mortgage borrower's credit report negatively.
#4 As-Is Selling
Buyers interested in homes priced under the market value or priced below the seller's original cost understand that the seller receives no cash from the agreement, but the transaction price also means the buyer has little leverage to negotiate for any repairs as part of the sales price. This allows the seller to offer the home "as is." The buyer's lender may mandate repairs, but the seller has the option of requiring the buyer to pay for them.
#5 Tax Benefits
This can be a stressful and emotional decision. Please let me know how I can be helpful. :)
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