Get Paid To Sell Your Home At A Loss

It sounds like it’s too good to be true: If your home mortgage is upside down you can sell your home for market value, not owe the remainder of the mortgage balance AND get paid $1,500 to move!

That’s pretty much what the Obama administration’s new plan is for kick-starting the economy and helping homeowners who are stuck in houses that are worth less than their mortgage amount.

Sell Your Home At A Loss

The process of selling something for less than you paid for it is called a “short sale” and mortgage banks and lending institutions have not been allowing homeowners to short sell their homes when at all possible. The New York Times broke this story but now other news outlets are reporting it as well.

Get Paid To Sell Your Home At A Loss
Get Paid To Sell Your Home At A Loss

Starting on April 5th, this home selling plan will allow homeowners to sell their home for its current market value, not pay back the rest of the mortgage amount and they will get $1,500 in relocation money to help move to or rent a more affordable home or apartment. The lender who agrees to work with the homeowner during this will be given $1,000 to forgive the mortgage balance and another $1,000 for a new loan.

To make sure that everyone is on an even playing field the lender is also prohibited from suing the homeowner at a later date for not paying back the rest of the original mortgage amount owed. This way homeowners also don’t have to worry about credit scores and credit rating being too negatively affected.

Can we get tax relief if we Sell Your Home at a loss?

Up to this point, many people have been having a difficult time trying to get a bank to modify a mortgage because it just didn’t make sense for the banks to essentially “lose” money that they already had coming in. This program would force banks and mortgage lenders to work with the homeowner as long as the home was able to sell for current market value.

The whole plan still relies, however, on you being able to sell your home to someone else. Your home’s value for this program can only be determined by a qualified real estate agent and not by the bank or mortgage holder itself. This means that you’ll still have to sell your home in a bad economy, but at least you can lower the price to what the market is willing to bear.

Let’s look at a practical example of how you could sell your house short and get paid for it.

Suppose that in 2005 you bought a home for $250,000 and you financed the entire mortgage. Let’s say you’ve paid $10,000 of that off, but you still owe $240,000. However, due to the declining home values, a real estate agent tells you your home could only sell for $200,000.

Also Read: The Three Mortgage Financial Steps To Getting A Mortgage

Without this program you would have two options: sell your home for $200,000 and still owe the bank $40,000 or you could try to sell your home for $240,000 but you probably wouldn’t get any takers.

Now you have a third choice: After April 5th his new plan will allow you to sell your home for $200,000 and it will force the bank to forgive the $40,000 you owe. You’ll be free and clear of a mortgage and you’ll even get $1,500 from the federal government to help move and find a new place to live.

Get Paid To Sell Your Home At A Loss
Get Paid To Sell Your Home At A Loss

While this seems to work on paper, it still remains to be seen if mortgage lenders will cooperate with this plan or if real estate agents will be able to judge market values with a fair and unbiased eye. One problem that’s been pointed out is that real estate agents still have an incentive to overvalue homes because they are paid a percentage of that home sale amount. It also remains to be seen if the weakened job market will continue to prevent people from buying new homes, even if prices are much lower.

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