Can I Sell My House With a Tax Lien?

Can I Sell My House With a Tax Lien?If you haven’t paid taxes, a lien can be placed on your home. This can be a huge financial burden. If you want to sell your home, those liens will get paid off first, putting far less money in your pocket. Let’s take a look at what a tax lien ultimately means for you and what you’re going to need to know.

What Is a Tax Lien?

A tax lien is placed on a home if you owe the IRS for unpaid taxes. The government doesn’t seize your home, but they place a lien on it, which means that if the property is ever sold, the lien will get paid out before you do. Let’s say you have a $200,000 home with a $20,000 tax lien on it. If you sell the home, $20,000 will go to taxes, and $180,000 will go to you (less any real estate fees). The trouble with a tax lien is that you cannot pay your mortgage loan off without paying the lien off first.

A tax lien is often related to property taxes, but it doesn’t have to be. It can also be related to income taxes or other types of tax assessments that haven’t been paid. This is why you should always keep up to date with your taxes and open lines of communication with tax professionals. The more communicative you are, the less likely it is that they’ll try to aggressively collect.

How Is the Tax Lien Paid?

Paying off liens is part of what an escrow company does. If you have a lien on the house, the escrow company will find that lien and will make payments to the lien first and then to you only after. So, you don’t need to do anything extra to pay the tax lien; the escrow company will handle it for you. Tax liens are public record so it will be easy for the escrow company to find out about the lien. This is one of their jobs. The lien can follow the property, so it’s the escrow company’s responsibility to make sure the lien is paid and dissolved.

Should You Worry About a Tax Lien?

A tax lien can be a financial burden. The IRS will continue to attempt to collect the funds, so if you have trouble paying your mortgage, they may push your property closer to foreclosure. If your home goes into foreclosure, the lien will be paid, but you will lose your house. Your credit will be negatively affected as well. 

How Do You Clear a Tax Lien?

A tax lien can be cleared by paying off the debt. You can either pay the tax assessor directly and they will remove the lien, or you can sell the property which will automatically take care of the lien. If you are at risk of not making your mortgage payments, or just want out from underneath the lien, selling the property to a cash home buyer may be your best option. They will purchase your property in its current condition, in days rather than weeks. The lien will be gone and you can avoid foreclosure or worse.

Do you have a tax lien? We can help you remove it for good. Contact Purple Mountain Holdings today to find out more. Reach us online or by phone at (719) 476-2727.

What Is Pre-Foreclosure?

What Is Pre-Foreclosure?Pre-foreclosure is exactly what it sounds like: it’s when a house is about to go into foreclosure but hasn’t yet. During pre-foreclosure, there’s a lot that homeowners need to know — about their situation, what they can do about it, and what their rights are. Here’s what you need to know about the pre-foreclosure process and what it means for you.

When Does a House Go Into Foreclosure?

A home does not go into foreclosure until mortgage payments are 120 days late. Many banks will let you go beyond this period, however; it’s just the soonest they can actually declare foreclosure. Banks don’t want to foreclose on a property because it’s expensive. To go through the foreclosure process, they need to take control of the property and spend money on lawyers, which cuts into their profits. That’s why they would rather work with a homeowner than foreclose.

What Is Pre-Foreclosure?

Pre-foreclosure is, as mentioned, the time before a home goes into foreclosure. A home can be saved from foreclosure at any point until it has legally changed hands. That means you can pay off your debts and stop the process of foreclosure even if the bank is already planning to sell your home. You just have to accomplish it before the sale goes through.

Pre-foreclosure is a delicate time. No one wants to go through foreclosure. It’s a financially tumultuous process and can seriously damage your credit.

How Can You Stop Foreclosure?

A foreclosure can be halted multiple ways. First, you can declare bankruptcy — not the optimal solution, but it does stall foreclosure while you figure things out. Second, you can sell your home. This is usually the best option, because it prevents you from having to go through the full process of foreclosure, saving you money and time. You may also be able to talk to your bank about getting your loan modified — but by the time you’re in pre-foreclosure, it’s often too late.

What Happens During Pre-Foreclosure?

During this period, the bank will usually take action to sell your home. Some banks have agreements that let the bank put your home on the market directly if you haven’t paid your mortgage. Other banks must initiate the foreclosure process through the courts so a judge can verify the banks have standing. Either way, foreclosure will ultimately end with the property being put up for sale, often for auction. During this process, you can offer to pay back the mortgage loan at any time, but that’s usually a big ask.

How Do You Sell Your Home During Pre-Foreclosure?

The process of selling a home during pre-foreclosure is the same as selling it at any other time. The caveat, however, is that if you’re already in pre-foreclosure, you need to sell your house fast. That’s where a cash home buyer comes in. Cash home buyers are able to purchase a house outright in cash so that you can close within days rather than weeks. You’ll be able to pay off your loan right away with the bank, rather than letting the bank sell your house and deduct legal costs and other associated fees. Selling your home is almost always the best choice because it immediately gets you out of foreclosure and out of a home that you may not be able to afford.

If you’re heading toward (or are already in) pre-foreclosure, it’s already time to get help. Contact Purple Mountain Holdings today online or by phone at (719) 476-2727. We can give you a fair offer for your home so you can sell your property now and stall the process of foreclosure.

Should I Remodel My House or Move?

Should I Remodel My House or MoveYou have been living in your home for a while and you still like the place. However, it is no longer what you need or want. So, you probably start asking yourself, “Should I put my home up for the sale and move out, or remodel it and stay?” In order to answer this question, you need to consider certain factors, including your personal emotional attachment to the house, the potential return on your investment if you remodel it, and your financial situation. Here is what experts think you should take into consideration when choosing between remodeling and selling your current home.

Are You Emotionally Attached to Your Home?

Think about your relationships with your neighbors and your feelings about the area you live in. If you have strong emotional ties to both, then remodeling may be a better option for you. You can hire a residential architect, who will help you get maximum functionality out of the house you currently live in.

How Long Will a Renovation Take?

Many homeowners do not realize that renovation is a long-term and serious commitment that takes a lot of energy and time. For example, a complete kitchen remodel that includes new cabinets, countertops, floors, and appliances may take between 3 and 6 months. If there is also wiring or plumbing that needs to be done, that renovation may take even longer. A bathroom remodel takes approximately 2 or 3 months, and a room addition — not less than a month. You need to realize that you have to stay patient, which can be quite difficult. It is not easy to live in a house that is being renovated for months.

What Will Your Return on Investment Be?

Before opting to remodel or sell your home, you should determine your return on investment.  According to the statistics, most home renovations do not increase the eventual sale price of a house significantly. Some renovations cover up to 90% of their costs, while others cannot cover more than 50%.

Are You Risking to Over-Improve Your Property?

If you decide to remodel your current home and renovate many aspects of it, you risk over-improving compared to other houses in your neighborhood. If you can sell your over-improved home at all, you’ll still receive less for it than you would if it was built in a different neighborhood with similar houses. If you decide to renovate a home in a neighborhood with starter homes, your renovation may not yield the return you would expect.

Is There Still Enough Space in Your Home?

If your home is small and your family is growing, a renovation may not solve this problem. In most cases, you can make your property look nicer, but you cannot make it bigger. Therefore, if you feel you have outgrown your current home and need more space for all your family members, you need to sell it to get a bigger house instead.

What Is Cheaper for You: Selling or Renovating?

For most homeowners, cost is the major factor in home-renovation decisions. Whether or not it is cheaper to do renovations and stay in your home instead of moving depends on numerous factors, including your mortgage situation and how much savings you have. It is important to realize that renovations require immediate, out-of-pocket expenses that you may not be able to afford. Selling your home instead will put money in your wallet now but will cost you a lot in the future.

Sell Your Home Fast With Purple Mountain Holdings

If you’ve decided that renovation is not an option and you want to sell your home in Colorado Springs, you have a chance to do it fast. Purple Mountain Holdings is a real estate investment company that is ready to buy your home for cash immediately. You do not have to hire a real estate agent, prepare your house for the sale, pay real estate commission, and wait until you get offers. You can sell it fast and receive more money in your pocket to achieve your new goals. Do not hesitate to give us a call to discuss the options and receive your cash offer.

Why It’s Better to Work With a Real Estate Investor Than an Agent

Why It’s Better to Work With a Real Estate Investor Than an AgentWhen it comes to selling a home, most people prefer to work with realtors because it is the traditional and proven method used by millions of homeowners. However, working with a realtor is not always a positive experience. There is no doubt that realtors are professionals who know what they are doing and who will do their best to sell a house. However, working with real estate agents does not always benefit homeowners. If you want to make the process of selling your property as easy and straightforward as possible, here is an alternative — working with a real estate investor. Here are five reasons why this option is better than selling your home with a realtor.

You Can Sell Your Home As Is

If your home is not in perfect condition, a realtor may refuse to work with you. Even if they do not, most likely you will have to invest a lot of money into remodeling and expensive repairs. By working with an investor, you will not have this problem because investors buy properties in any condition. This allows you as a seller to avoid additional expenses that come with addressing problems with your property. Investors are not bothered at all by the state of your property because they will hire contractors to handle all the issues.

You Can Avoid Foreclosure

If you are late with your mortgage payments, you may face foreclosure. If your home is already in foreclosure, you are given a very short period of time to sell it before the foreclosure is completed. In most cases, this period is no longer than 90 days. You may not have enough time to find a realtor, list your house, and get offers. Therefore, the best option for you will be working with an investor. Investors constantly buy homes in foreclosure and know exactly how it is done. They will be able to arrange a short sale for you and close the deal before the foreclosure date.

You Can Sell Your Home in a Bad Neighborhood Easily

If your home is located in a bad neighborhood, it will not be easy to sell it. In that situation, even the most highly qualified realtors will struggle to find buyers who are interested in your property. Investors do not care about the location of your home because they are not going to live in it. They will buy your house in order to make it so great that they will be able to find a buyer easily.

You Will Receive Cash for Your Home

Even though realtors can help you find buyers, they cannot guarantee that the potential buyer will be able to buy your home. Most buyers need a loan from the bank to pay for the house, and there is a chance that a buyer will not be approved for the loan. There are many cases when buyers enter the sale process and then are denied by the bank. In order to avoid this situation, it may be better to sell your property to a real estate investor who has their own money and does not need a loan from the bank.

You Do Not Have to Deal With a Lot of Paperwork

If you are selling a property with a realtor, there is extensive paperwork because you are dealing not only with your realtor but also with a buyer and their agent. This does not happen if you work with an investor because there are no third parties to satisfy. This reduces the amount of paperwork, which makes the whole process much easier and less stressful for you.

Sell Your Home Fast With Purple Mountain Holdings

If you’ve decided to sell your home in Colorado Springs and need to do it fast, Purple Mountain Holdings is ready to help you. We will buy your home, no matter the condition, on the date of your choice. You do not need to do any repairs or cleaning because we buy properties as is. All you need to do is to give us a call to ask all the questions you have. We are ready to help you if you are facing foreclosure, have a house full of stuff you do not need, or want to sell the home in order to buy another. Do not hesitate to contact us today to get a cash offer tomorrow.

Should I Sell to a Home Investor?

Sell to a Home InvestorWhen we think about selling our home, we often think about selling to a family or maybe even a young professional. But there’s another option too: selling your home to a home investor. Selling your home to a home investor has a lot of benefits, but they’re also situational. Here’s what you need to know.

Selling to a Home Investor: The Advantages

Why don’t we hear more about selling to home investors? Well, a lot of times it’s just that people don’t know to go to a home investor first. There are numerous advantages:

You don’t need to renovate or repair your home

Most buyers want to see, at minimum, new carpeting. But home investors are willing to purchase a home as-is because they know that they can complete the repairs cheaper than you can. This is of critical importance, and it’s also why they can offer you fair market value. They know it needs repairs, but they can complete them affordably.

You can close quickly

A home investor isn’t going to bother getting a mortgage (which could fall through too). Instead, a home investor can produce cash for the purchase and close once the wire transfers have gone through.

You save money

With a home investor, you don’t need to go through a real estate agent. That also means you don’t need to pay expensive real estate fees. You’re just paying the costs of the actual transaction.

You get fair market value

A lot of people are skeptical of home investors. They think they’ll get low-balled because the home investor is going to flip the home. But the truth is, because of economies of scale, the home investor will invest a lot less money into getting the home ready to sell than you would have to invest. So, they’re really saving you money and are able to give you fair market value.

You skip inspections and appraisals

A home investor decides how much they’re willing to offer, and you decide whether that seems right to you. Otherwise, you have to get an inspection report and make repairs that are requested there. You may not be able to sell your home for as much as you want to with a private buyer because you will be limited by the appraisal. The home investor doesn’t need an official appraisal.

You won’t deal with last-minute financing failures

When you’re dealing with a regular home buyer, their financing can fall through in the last mile. You might find yourself having to go back to square one and find a buyer all over again. A home investor isn’t going to waste your time like this.

With all those advantages in mind, it’s surprising more people don’t go directly to home investors. But a lot of that is because people are used to working through real estate agents.

When Wouldn’t You Sell to a Home Investor?

At this point, you can see that selling to a home investor is almost always the best option. Home investors aren’t picky, they know what they want, they’re willing to pay fair value, and they’ll close on a sale fast. What more could you desire?

Well, a home investor isn’t going to get trapped into a bidding war. If you’re trying to sell your home for more than it’s valued, an investor probably isn’t your best bet. If you’re selling your home for sentimental reasons and are really attached to the family who will eventually take your place, you also might not want to work with an investor.

For most people, though, selling to a home investor is the best choice. But that means that you need to find an investor interested too. Contact Purple Mountain Holdings today to find out whether this could be an option for you.

How to Know When It’s Time to Sell Your House

Sell Your HouseYour home isn’t your “forever home.” But how do you know when it’s time to sell? Selling a home is a unique, individual process. It depends on the market, your position in life, and your current needs. Here are a few signs that you might be ready.

Your Home No Longer Suits Your Needs

If you’ve gone through a major life change, such as having a baby or retiring, it may be that your once-perfect home is no longer suitable. Maybe you need more space or less space, maybe you need certain features such as a pool, or maybe you just feel that you need room to grow. When your home no longer suits your needs, you have two choices: You can renovate or you can sell. For the most part, selling is usually cheaper if you need to make major changes.

You Can’t Afford Your Property

Are you falling behind every month? If you’re in the red on your property and you think it’s going to be like that for a long time, it’s probably better just to sell. If you hold onto your property for too long, you could just find yourself in a worse financial situation. (On the other hand, if your financial issues are temporary, you might want to hold on.)

There are other options. You can try to refinance your home, for instance. But that often requires an excellent credit score if you really want to get the best benefits.

You Need More Repairs Than You Can Afford

Sometimes, you can get locked into a situation that’s falling apart. Your HVAC system is failing, you need to replace the roof, and the water heater is on its way out. If you need more repairs than you can really afford, it may be better to get out of the house now and move into a situation that’s more comfortable. Otherwise, you’re just going to end up in an untenable situation once the repairs become absolutely necessary.

You Can’t Take Care of Your Home

Maybe you’re too busy to take care of your home anymore, or maybe the task has just become a little too much for you. If you can’t take care of your home anymore, it might be time to downsize. Downsizing a property gives you the opportunity to secure some equity for other things in your life while also ensuring that you have a home that’s the right size for you and your family.

Your Home Has Appreciated Significantly in Value

Sometimes you just want to secure your equity and run. If your home has appreciated significantly in value (such as being in a high-growth market), you might be inclined to sell your property now and then purchase something equally sized (or even larger) in a more affordable area. Sometimes it’s best to capture your equity, especially if you think that real estate in your area may be in a bubble or just accelerating too fast.

You Need to Move and Don’t Want to Rent

There are situations when you just want to move. In those situations, you might be wondering whether it’s time to sell or whether you want to rent it out. Renting out a property does bring you in passive income, but it’s also an immense undertaking. You need to consider whether you want to really become a landlord, or whether it’s easier to sell your home outright and move on. And while you can hire a property management company to manage things, that’ll also cut into your profit.

Sometimes you just know when you need to sell your home. Other times, you need to consider everything before you make an educated decision.

These are all significant signs that it might be time to sell your house. But no one can really tell you whether it’s time to sell your home but you. Whether you’ve outgrown your home or can’t afford it, it’s good to know the options are there. Contact Purple Mountain Holdings today to get a quote.

Why Should I Sell My House?

I Sell My HouseThere once was a time when people would build their home with their own two hands, and then they would live it in for their entire lives. That tradition largely ended a hundred years ago or so. Today, a house isn’t just where you live. It’s an investment. Because of that, it’s perfectly normal to sell a house and move into a new place. No doubt, you understand some of the reasons to sell your house, but if you’re feeling like you’re in housing limbo, here’s a quick list of times when you should really consider selling.

You’re Ready to Upgrade

This is the best, most exciting reason to sell your house. You’re ready to upgrade. Sometimes that just means more square footage. Other times it means the custom home of your dreams. Maybe it’s just a better school district for the kids. It doesn’t matter. There are a lot of ways to upgrade, and when your financial situation allows you to upgrade, selling your house is exciting. Ideally, you’ll be making a profit off of the sale, and you’ll be enough ahead to cover the down payment on the next house. Sometimes, you’re even better off. Regardless, embrace the sale, and make the most of this exciting time.

You’re Ready to Downgrade

Downgrading can be just as invigorating as upgrading. Sometimes, downgrading is about getting a less expensive house to help with the finances. That’s fine. Other times, it means you don’t want to have so much house to manage. Knowing that and choosing to downgrade is a great decision. When you sell your house, there’s a good chance you’re going to come out way ahead on the next one, and your finances will be simpler. You’ll also be better able to take care of the new place and have a chance to be happier all around.

You’re Struggling Financially

This is not so exciting, but it happens to the best of us. Almost everyone has run into financial trouble at some point or another. If your mortgage has become unbearable, selling your house is usually the best way out. You can conceivably sell the house for enough to settle the mortgage and have something left over. Even when that’s not the case, selling can still be the best way out of the mortgage so you’re free and clear.

You Have an Opportunity for Financial Gain

On the flip side, there are times when you can sell a house solely to make money. This is what they refer to with timing the market. If housing prices in your area have gone up, making your house worth a lot more than you paid for it, sometimes it’s best to strike while the iron is hot. You might want to sell in order to cash in on that appreciation, and that’s not an unreasonable choice. Selling in a hot market is a great way to make a bunch of money. You can use that money for your next home, and you can expand your portfolio while you’re at it.

You Have To

There are many circumstances that will force you to sell. If your job is relocating you, then you’re going to have to do something with your house. Sometimes, family situations force us to move. Selling is usually the way to go in those times. You might be up against foreclosure, or maybe a natural disaster put your home through the wringer. The list goes on. Here’s the thing to understand. No matter what situation is forcing you to relocate, selling is an option even if you don’t think it isn’t. Even when a fire burns a house to the ground, you own the land it’s on, and that land still has value. It’s tough to see options as opportunities when you’re facing a struggle, but remembering that a sale is still on the table can ultimately help you through a stressful time.

No matter which of these situations applies to you, Purple Mountain Holdings is willing to buy your house. Simply, fill out our contact form, and we’ll make an offer on your house. You can sell your house, no matter the circumstances, and you can do it in remarkably short order and with no hassle at all.

5 Ways to Get Out of Your Mortgage

Ways to Get Out of Your MortgageBuying a house is a huge commitment. Sometimes, first-time homeowners learn that they don’t really want all of the extra work and hassle that comes with owning a house. In other cases, circumstances change, and the house that was great becomes an untenable burden. No matter how you get to the situation, if you want out of a mortgage, you need options. Here are five ways you can get out of a mortgage and into a better situation:

1. Sell Your House the Old-Fashioned Way

By far the most common way to get out of a mortgage is through a traditional sale. Contact a realtor. Put your house on the market. Go through all of the steps, and ultimately, you can sell your house. The goal is to sell for more than you owe on the mortgage. As long as this method is successful, you walk away with no more mortgage and a pile of cash you can use to get started on your next home. Of course, there are no guarantees with a traditional sale, and unless you’re in a very hot market and willing to underprice, a traditional sale can take months to years to complete. But if you have the time, this is the common practice.

2. Deed in Lieu of Foreclosure

If you don’t have time or you just want out now, you can contact your lender and offer a deed in lieu of foreclosure. Ultimately, it’s up to the lender to decide whether they really want to go this route, and market conditions will influence their decision. That said, it’s usually possible to negotiate this kind of agreement. Your lender accepted the house as collateral against the loan in the first place, so it’s not odd to offer them the deed in order to walk away.

It’s important to understand that this option will always lose you money. You’re offering the deed to settle the debt. That means any mortgage payments you made until now are forfeit. You walk away with nothing. You don’t have any more debt, but you don’t have anything to show for your investment either.

3. Refinancing

Most people who are struggling to make mortgage payments should look into this option first. A refinanced mortgage can change your monthly payments. That can make it easier to catch up and/or stay ahead. Refinancing almost always means that you’re delaying the day when the house is fully paid. You also need to pay close attention to interest rates and the total payment schedule. If you’re considering refinancing and don’t know much about it, you should contact your local housing assistance office. They usually offer free counseling to help you make sure your refinanced deal is in fact a good one.

4. Government Assistance

Speaking of government assistance, if you went through any of the federal loan programs, you have extra options. This includes FHA loans, agriculture loans, veteran loans, or any of the other less-common programs. If you’re having trouble making payments, you can reach out to the program office that helped you. They can look into options with you, like refinancing or modifying the loan. A loan modification is similar to refinancing in that it will change your monthly payments, but it’s a little more complicated, and you’ll need to go through an approval process for it.

5. Fast Sale

Ultimately, selling your house is the best way to truly get out of a mortgage. The traditional sale is the most common choice, but it’s not the only way to sell your house. You can consider a short sale or a cash sale.

A short sale is where you negotiate with your lender to sell the house for less than it’s worth but still settle the debt. That’s a complicated negotiation, but it usually gets you out of the mortgage faster than a traditional sale.

The other option is to sell to a real estate investor like Purple Mountain Holdings for cash. We can take you through the entire sales process, and we can get it done in a week, if you’re in a hurry. Simply contact us, and fill out an easy form. We’ll get in touch with you to schedule a walkthrough. Once we see the house, we’ll make you an offer. If you like the offer, we’ll close. If you don’t like the offer, you have all of the other options on this list. It couldn’t possibly be easier.

How to Sell Your House When It Has Tenants

How to Sell Your House When It Has TenantsYou want to sell your house, but you still have tenants. Maybe they’re on a month-to-month lease. Maybe they have another year to go. Regardless, you’re selling an encumbered property. What’s your next step?

Before we even start, you need to know that selling a house with tenants comes with some major challenges. First, showings are harder. You’re showing a house that’s lived in, and often not at its best. Second, most people don’t want to purchase a house with tenants because they then need to deal with those tenants. But there are options that can make this easier.

Make Sure Your House (and Tenants) Are Ready

If there are any glaring flaws in your house, it’s time to fix them. There may be issues such as bad carpeting, but you don’t want to disrupt your tenants. You may need to come to an understanding with them about some of these repairs. Further, you should make sure your tenants are current on their rent. If they aren’t, then it’s going to be even harder to convince someone else to take them on.

Schedule your showings on a specific day, such as Saturdays, so you aren’t disrupting your tenants’ lives too much. That’s for their benefit and yours. You don’t want to interrupt their quiet enjoyment of the property, and you want to give the tenants enough time to clean up before showings.

Look for Investors

Obviously you’re not looking for first-time home buyers or resident owners to purchase your home because they’re going to want to move into it immediately. If you have month-to-month tenants, resident owners are still going to know that an eviction could take a year or more if the tenants decide not to leave. Instead, you should be looking for investors, ideally people who already want to be purchasing rental units. For them, existing tenants could be an advantage.

You can also look for house flippers and long-term investors, the types of people who are in it for the long haul. Many of them are willing to take on tenants in the short term to get an excellent property in the long term. Companies that purchase homes for cash are often willing to wait a little while for them to be vacant. In the meantime, the tenants often take care of the home.

End the Lease as Soon as Possible

If it’s a month-to-month lease, you might want to consider terminating it now even if that means you’ll be on the hook for the mortgage. Realistically, it’s just far easier to sell a house without anyone in it. If someone has a lease for six months, you shouldn’t renew it either. While an investor may be fine being encumbered for the next six months, they might not be fine being encumbered for the next two years. 

There’s another possibility known as cash for keys. Sometimes you can offer your tenants money to move out early. Usually it has to be more than enough to cover their move with some extra. If you’re trying to sell a property now, and if there’s a lot of money on the line, cash for keys can be very effective. But if you’ve got the time and need the rent payments, cash for keys might be an outlay of funds that you’re not prepared for.

Long story short, selling a house with tenants is a challenge. Most buyers don’t want to purchase a house when it has tenants, because it’s such a variable situation. But you’re in luck. At Purple Mountain Holdings, we can make you an offer, even if you have an existing lease. Contact us today to get started.

What Happens to My Mortgage When I Sell My House?

What Happens to My Mortgage When I Sell My House?Are you thinking about selling your house? If you haven’t gone through the process before, you should know that it’s a major financial event with many moving parts. One of the most important things to understand is what will happen to your mortgage when you sell. We’re going to break that down for you right now.

The Exchange of Money

There are several different situations that can arise when selling a house. Typically speaking, people take out a mortgage when they buy a house. They then make regular payments on that mortgage and eventually pay it down. You know this already, but this is what sets the stage for the exchange of money when you sell. How much of the mortgage you owe at the time of selling will be the biggest determining factor in what happens when you sell a house.

Equity vs. Lien

There’s an old saying that until you pay off the mortgage, the bank owns your house. While the sentiment is understandable, the saying isn’t technically true. Instead, lenders use what is called a lien. Basically, this means that they have the right to sell your house if you default on your mortgage. Getting to that point takes time, and until you’re in default, the bank doesn’t own anything. You own the house. You just owe the bank money.

So, as soon as you close on the house you’re buying, you completely own it. Whatever the house is worth is completely yours. You just also owe the bank whatever you borrowed from them.

This is what brings us to the concept of equity. Equity is a way of comparing the value of the house to the total of the mortgage. If you take however much you can get from selling a house and subtract whatever is left on the mortgage, the remaining amount is your equity. It’s the total amount of money that will be in your pocket when everything is done. As you make payments on your mortgage, the amount you still owe goes down, and that means your equity goes up.

Knowing this, what does the actual process of selling look like?

Balancing the Ledger

The first step in balancing the ledger is to ask your bank what your payoff amount is. This will be the total amount remaining on the mortgage plus any fees. It will not include interest because you won’t owe any additional interest when you fully pay off the loan. As for the fees, they can include early payment fees, processing fees, and a few others that show up sometimes (like title processing or appraisal). The combined total number you get from the bank (again, called the payoff amount) is what you will owe the bank when you finalize the sale of your house. This helps you figure out a minimum asking price.

If you sell the house for more than your payoff amount (which is the most common scenario), then you use the money from the sale to completely close out with the bank. This means paying every last dime of that payoff amount. Once that is done, you get a check for whatever equity you had in the house. Part of the processing fees that you pay turn this into a single transaction on your end. Everything goes through the bank, so you just get a check when it’s all said and done.

If you sell the house for less than your payoff amount, you won’t get a check when you’re done. Additionally, you’ll still have to make payments on whatever is left of your loan. Before committing to this, you should be able to get a total breakdown of costs and payments from the bank. You can also explore alternative options, one of which is covered next.

Short Sale

If you owe more than you can get for the house, you can look into a short sale. The basic idea is that you negotiate with your lender to see whether they’ll accept a short sale. In this agreement, they get 100% of the money from selling the house (sometimes minus some of the closing costs), and then they forgive the loan. It ultimately means that you’re getting out of your mortgage for less than you owe, but it also means that you walk away with nothing when the transactions are done. It can be beneficial in situations where a property significantly depreciates. That said, a short sale is more complicated and can make it harder to get a final sale approved.

That’s really it. Banks, title companies, and third parties handle the paperwork and logistics of everything. What is most important for you to know as a seller is that you are legally obligated to pay the mortgage with the proceeds of the sale before the money can go anywhere else. That’s true even if you sell the house for cash, which is a simplified case you should consider. Purple Mountain Holdings is a cash property buyer in Colorado Springs. Contact us to see what some of your options are.