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I sold a home at a pretty significant loss. I just took the hit; I bought a much nicer place also at a reduced price (the market overall was bad, so between the purchase and the sale, I came out ahead).
You just take out a larger mortgage on the new place than you otherwise would.
But, this meant you had the cash to eat the loss. Questions is for those who have no cash.
But, this meant you had the cash to eat the loss. Questions is for those who have no cash.
If a person has no cash and happens upon hard times while he/she is underwater on their house, then they are just SOL unless they have family who will bail them out. Bankruptcy is very likely... along with all the problems that go with that.
If a person has no cash and happens upon hard times while he/she is underwater on their house, then they are just SOL unless they have family who will bail them out. Bankruptcy is very likely... along with all the problems that go with that.
Not strictly true.
One can always do a short sale on the house, where the sale price is less than the mortgage owed. The mortgage company does have to approve this.
The result is that once the sale is completed, some amount of the mortgage will be forgiven. That amount does count as taxable income, so you take a hit on that, and of course you have no equity.
I had to do this several years ago, and was able to purchase a new home 4 years later. I did not have the greatest credit rating at the time, so my initial mortgage rate was not the best, but it wasn't terrible either.
I did not have to file bankruptcy, and other than the short sale, I did not default on any other debts.
One can always do a short sale on the house, where the sale price is less than the mortgage owed. The mortgage company does have to approve this.
The result is that once the sale is completed, some amount of the mortgage will be forgiven. That amount does count as taxable income, so you take a hit on that, and of course you have no equity.
I had to do this several years ago, and was able to purchase a new home 4 years later. I did not have the greatest credit rating at the time, so my initial mortgage rate was not the best, but it wasn't terrible either.
I did not have to file bankruptcy, and other than the short sale, I did not default on any other debts.
Then one can't ALWAYS do a short sale if the mortgage company has to approve it because sometimes they may not approve it. And I didn't say that bankruptcy was inevitable. I said it was "very likely" if they have no cash and happen upon hard times. Apparently you are one of the fortunate ones who didn't run up a lot of other bills that couldn't be paid in addition to their mortgage which couldn't be paid. Good for you.
One can always do a short sale on the house, where the sale price is less than the mortgage owed. The mortgage company does have to approve this.
The result is that once the sale is completed, some amount of the mortgage will be forgiven. That amount does count as taxable income, so you take a hit on that, and of course you have no equity.
I had to do this several years ago, and was able to purchase a new home 4 years later. I did not have the greatest credit rating at the time, so my initial mortgage rate was not the best, but it wasn't terrible either.
I did not have to file bankruptcy, and other than the short sale, I did not default on any other debts.
This seems to be the answer. Short sale and you're out from underwater and loss of equity.
Seems like if short sale is not approved, owner can just walk. Blood from turnip
What is the advantage of a short sale (no equity) vs. just mailing in the keys?
Different hit on the credit report?
In non-recourse states (12 = Alaska, Arizona, California, Connecticut, Idaho, Minnesota, North Carolina, North Dakota, Oregon, Texas, Utah and Washington) one can pretty much 'walk away' from a property. Many did this when the the 2007-2009 property bubble burst - and then bought similar or expanded property at lower prices in a declining market.
If one is NOT in a non-recourse state, banks and other mortgage holders can go after any property held by the owner and/or pursue other means to get their money (ie; salary garnishment, liens, etc).
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