Maybe you're tired of your old neighborhood, or maybe you lost your job and your mortgage payments have become too much to handle. Regardless of your motivation for wanting to sell your house, it can be disheartening to watch it sit on the market for months on end. There are options available to you.
Become a Landlord
Renting out your home is one way to free yourself up to relocate. Individuals with families may prefer living in a house over living in an apartment. However, pervasive economic troubles have left some families in a position where their credit prevents them from obtaining financing for homes of their own. Your house could represent an opportunity for families with troubled credit to obtain the space and privacy that only comes with occupying a house. At some point, your tenants may be able to build sufficient credit to borrow the money needed to purchase your house. Alternatively, by the time the lease term is up, the housing market may have turned around, allowing your home's value to increase and potentially sell. Note, however, that you risk getting tenants who do not pay the rent. This could mean you get stuck paying the cost of both your old and new home.
Short Sale
A short sale allows you to sell your home for less than you owe. You may be having trouble selling your home because it is priced too high. This is especially likely if your home is worth less than you owe and you based your minimum sales price on your loan payoff amount. Fortunately, a short sale gives you room to drop your price to what your home is actually worth. You must, of course, obtain your lender's permission to utilize this option. Also, be mindful that choosing this option can have tax implications. If your mortgage company writes off the unpaid portion of your loan, the Internal Revenue Service may impute the forgiven debt to you as income.
Deed in Lieu of Foreclosure
If you absolutely cannot sell your house but must relocate, consider a deed in lieu of foreclosure. A DIL allows you to, in essence, hand your house keys to your mortgage lender and walk away. With a DIL, the mortgage company typically agrees to forgive the loan balance in exchange for you deeding the property over to the lender. Foreclosure can be a costly and time-consuming process for mortgage lenders. Accordingly, while your mortgage company does not have to agree to a DIL, it may choose to do so to save money and time. Note that the IRS may impute the forgiven debt to you as income.
Bankruptcy
Bankruptcy should only be considered as a last resort because it remains on you credit report for seven to 10 years. However, there are generally no tax implications for surrendering your house in bankruptcy. When you file for bankruptcy, you must file a document called a statement of intention. In this document, you tell the bankruptcy court what you want to do with your secured debts. A secured debt is an obligation that allows creditors to take your property when you don't pay. Your house is a secured debt. If, in the statement of intention, you disclose your wish to surrender the house, you may include all your mortgage debt in your bankruptcy. Doing this relieves you of all legal obligation to pay your mortgage loan and any other qualifying debts you include in your bankruptcy petition.
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