Having negative equity in your home means that the value of your home is less than the amount you owe on it. When you have negative equity, it will be very difficult to sell your home and make a profit. In fact, if you sell it, you may need to bring a check for the amount of negative equity you have in the house. If you are in this position and want to get rid of your home, here are the options you have.
Sell it for a loss
As mentioned above, if you sell your home right now, you will have to pay to sell it. You will not be able to find a buyer who will pay more for the house than what it is worth. Selling a house like this will result in losing money. If your home is mostly paid off and would not lose a lot of money through this option, it might be worthwhile to sell the house outright.
Sell it through a short sale
If you talk to your mortgage lender and they agree to let you use a short sale to sell your house, you would have the right to sell it without having to pay your lender the negative equity in the house. The benefit of this is that it would offer a way to get rid of your house without having to pay to sell it, but the downside is that you might have to pay taxes on the difference.
For example, if you sell the house for $150,000 and owe $180,000 on it, you might be required to pay taxes on $30,000 of income. The IRS views this deficit as income, which means your tax bill might be a lot higher next year if you sell your house through this method.
Rent it out
One other option you could consider is renting the house out to a tenant. If you do this, you could charge rent that is high enough to pay the mortgage, taxes, and insurance on the house. If you can find a good tenant that lives there for a while, he or she will basically be paying off your mortgage. Eventually, you would have some equity in the home and could sell the house at that point.
These are several options you could choose from if you have negative equity in your house. If you have questions about selling your house, talk to a real estate agent today.Share