Are there any options for creative financing if our home sells for less than we owe?

Asked by Molly, 80134 Thu Mar 12, 2009

We just contracted on a brand new house (dirt start) and met with our realtor to talk about putting our condo on the market. After reviewing the comps with us she doesn't think we'll even hit a break even point on a sale. Best case scenario is we're in the negative $10k. We don't have the funds to cover that as all the funds we do have would are going towards down payment and closing costs on the new home.

Any creative solutions out there? I'm so depressed after this meeting.

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Justin Ruzic…, Agent, Greenville, SC
Wed Apr 20, 2011
What? How did you not look at what your condos value was prior to starting the build? Did your Realtor walk you down this path? This should never ever happen. Here are two blogs that are a good read for you.

I hope it works out for you.
1 vote
Gary and Lin…, Agent, Colorado Springs, CO
Tue Dec 9, 2014
Yes, we can help! One suggestion would be to find a great tenant for your property who can pay the mortgage payment until the time that the market improves. We can sell the condo at that time. This would allow you to make the move into the property that fits your current needs.
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Lynne Wright, Agent, Parker, CO
Wed Sep 12, 2012
So, let the Lender for your new build know what has happened with your Condo sale. I have to assume that the Condo must be sold in order for you to qualify for the new home. When the dirt start was contracted, there should have been a period in which they verify your financial qualifications. If need be you can usually get out of that contract.

Doing a short sale on your current home would most likely be a huge credit mistake and keep you from getting the new home. Short sales are usually only for homeowners that are in financial distress.

Again, speak with the Lender as soon as possible! And, of course always let your Realtor know honestly what is going on, so that your earnest money can be returned if need be on the new home.

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Shelley Brya…, Agent, Englewood, CO
Thu Jun 14, 2012
Might you consider renting your current home?
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Marianne Ban…, Agent, Englewood, CO
Wed Apr 20, 2011
If you have a second mortage, so companies are offering to take less than is owed on that loan. I know people, as well as me, that have received offers on our second, if we would pay if off. Contact your lender if you have a second mortgage.
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David, , Aurora, CO
Thu Mar 12, 2009

I am sure your Realtor can provide you with many creative financing options. Have you considered renting the condo until the market turns enough for you to show some appreciation on the condo. Currently in our area rentals are in demand and you may find that the cash flow the unit generates may provide you with a good long term investment. If you have concerns about being a landlord, a management company may provide an alternative for you as well.

David Barber
ReMax Unlimited
Aurora, CO
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Keith Sorem, Agent, Glendale, CA
Thu Mar 12, 2009
Did you talk with the REALTOR before you signed the contract to build?

Your REALTOR is probably giving you great advice at this point. They know your precise situation.
If you look at the link below it appears that you are in a declining market. So you probably have a builder that is hungry. Did the builder ask you if you were qualified by a lender for the purchase?

Is your Realtor also representing you in the purchase of the new property?

I would ask your Realtor these questions. It is their job to help you figure out solutions and to manage your move, part of which is the financing.

Without having the answers to any of these questions my suggestion is that if you DID qualify for the purchase while still owning your condo, then you might want to look into the possibility of not selling and renting it. If you do consider that option check with your CPA regarding the tax implications. it is possible that the first few years will be tough, but as the economy turns around, might work out in the long run.
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John Barry, Agent, Eagle Rock, VA
Thu Mar 12, 2009
Hi Molly,

Have you spoken with your current lender about requesting the possibility of a short sale? This is possible when the outstanding loan balance on a property is more that the sale price, and you request that the lender forgive a portion of the debt on the property, which would allow you to sell the property and pay the lender the entire net proceeds of the sale. The lender would then forgive the outstanding loan balance and call the loan even with a . There are likely negative credit implications, but I understand that it is not as bad as a bankruptcy. You should check with your attorney or tax advisor to see how it would affect your credit. Normally you would need to have an accepted offer and also be behind in your payments before the typical lender will consider a short sale.

Maybe some other agents will have some other ideas for you..

Sorry to hear about your situation - best of luck to you.. Please email me at if you have any questions regarding this or if you need any more info..

John Barry
Coldwell Banker Residential Brokerage
California DRE #01856079
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