[REAL ESTATE] Do I make or lose money from selling home while still under loan?

County appraisals mean absolutely nothing in the true market for your home.

Look at sales comps for the area, or meet with a realtor to get a better idea on how much your home is worth on the market right now and whether it covers how much you have left on your loans.

EDIT: Meeting people is nice, but a gentleman shouldn't talk about meating people.

 

you can give me your subdivision and section number and I can get comps in your area for you. or email me your address for a better if you want. I promise I won't steal anything.

free of charge of course.

 

The simplistic answer is if you owe X dollars on your house and you sell it for X+ then you will make more than you owe, but maybe not make more than what you have paid in total.

 

All liens (and a mortgate or a loan on the property is a lien against it) must be met at the closing of the property. Both loans on the property will be due at closing, so you will have to make enough on the purchase price of the house to pay off both loans.

The closing company will do all this for you. They will distribute the funds of the sale to the proper mortgages, pay off any realtors, take out closing costs and prorated taxes for the amount of the year you lived in the house, then it will have to be decided if you need to bring a check to closing or if you get a check at closing.

So lets say you have an $96K loan and a $18K loan on the house and you sell for say, $120K.

120 X .94 = 112.8 (realtor commision 6%)

112.8 - 96 - 18 = -$1.2 (not exact since you still owe any outstanding interest up until closing date, your mortgage company will provide an exact payoff amount to the closing company)

-$1.2K - Closing costs/taxes, etc. (let's say about 5K or so) = -$6.2K

You bring a check to closing for $6.2K if you sell for what you paid for it.

If you do the same math for another amount you will have to adjust accordingly.

I would guess, however, that you have paid down some of the loan in the years you have lived in it, so the principal will be lower than the full amount of the loan when you do the math. Also, your house could be worth more than what you paid for it, so that should help too. Don't pay attention to HCAD appraisals when selling your house, they are fake numbers, sell it for what the market will bear.

Also, get SALES comps, not Market price comps. The market price comps show what people want for their houses. The Sales comps shows what people are GETTING for their houses in the neighborhood. However, www.har.com offers a good look at what people are asking in your area, so it'll give you a ballpark.

You have several things going against you.

1. You are in the wheelhouse of the price range where the subprime issue has hit hardest. The less expensive homes in similar ranges have seen drastic drops in sales.

2. You already are seeing foreclosures in your area, probably due to the price range you are in.

3. The market right now, even in Houston where it hasn't been nearly as bad as the rest of the country, is in a holding pattern. People are waiting to see about several issues and are kind of waiting on the sidelines when it comes to home shopping. People are waiting on the Presidential election, the bail out plan, the economy to uptick, gas prices, etc. Its a very strange market with lots of people that are going to buy, but basically waiting it out for some amount of time that we don't know yet.

If I were you, and prices have not increased in your area, I'd highly consider waiting a little bit before selling. Wait until some of the foreclosures are sold off, wait until the election (doesn't really matter who wins, its just the uncertainty, its a weird election year real estate cycle that happens almost every time), and wait for an uptick in the economy. Most of the sales guys and realtors around here think it'll be early to mid 2009 when we see a turnaround in real estate.

 

When you sell your house, the mortgage will be paid off....assuming that you sell it for more than you owe. Anything left over will be yours as profit. It's pretty simple. If you still owe 100k on your house and sell it for 120, then you come away with a 20k profit (not counting realtor fees and any repairs you'd have to make as part of inspections.)

I sold my house in June. I owed 146k on it, sold it for 154....but after repairs requested by the buyer and realtor fees, I only walked away with about a $400.00 profit.

 

You're probably getting a good deal on a new house, but you'll also have to probably slash your list price to get the old house sold in this shaky market. And that's if you're lucky enough to find a buyer. Not to mention the loss on agent commissions and closing cost. So unless you can afford it, avoid carrying two mortgages. In 2005, I bought my current home and didn't sell my old house for 6 months. And that was at the peak of the housing market. That was very stressful. Good luck.

 

Just to add to my experience, it's without a doubt a buyer's market right now. My advice is that if you really want to get out of your house and you can find a buyer that will at least allow you to break even and leave you with enough money to put down on a new house, then do it. I ended up getting a brand new house in the exact area I wanted (The Heights) for 20k below asking price.

Also, I actually found my realtor through this bbs and she was awesome to work with. She works on the west side/Katy area so shoot me an email if you want her info.

 

You can put your current home up for lease if you want to, rather than sell it. Sell it when the market value is higher. I currently have my first home leased out, and bought a bigger one.
I can't carry both notes and still be approved for more loans, but having proof that the other note is covered by the tennants, it's not a strike against my debt-to-income ratio.

If you sell the home, then your basically paying off what you owe at that time (the buyer goes into debt for the cost of the house), and if there is any extra, you keep it as profit.

I plan on keeping my rental property for a long time. Once it's payed off, at the tennants' expense, it's profit time.

 

300K, you're so rich.

I will buy your house for $1 right here, right now.

 

Ok, time for a reality check. People recommending the rental property option:
a) Is putting an even larger proportion of your assets into real estate really a good idea at this time?
b) He's unlikely to make a good return on a rental property if his neighborhood already has a bunch of foreclosures.

You paid zero down on your first house six years ago. Nothing you have said made me think that you have come close to paying off this inexpensive home. Now you are thinking about moving into a $200-300K home? You tell us you SHOULD be able to AFFORD it?

That's not the language I'd want to hear if I was your financial adviser. A home that costs over $200K is a luxury - and it comes with a lot more in associated costs. Your taxes will likely more than double. Your insurance costs will likely double. Your utility costs will go up, and repair costs may increase as well as you go from one hvac to two, etc.

Funny story - we paid off our 173K home a couple years after we bought it - and yet I wish we had bought a smaller home that would cost less in taxes and maintenance. (So far we've paid $5700 for A/C and $3K for fencing in 5 years.)

Aside from the increased costs, you shouldn't buy the expensive home at this point because of the market. Your realtor (biased, obviously), will tell you that now is a great time to buy - but most factors point to him being wrong. There's a glut of homes on the market, but Houston real estate prices haven't dropped significantly. If you are going to leverage $200-250K of investment dollars, don't you owe it to yourself to buy in at the bottom of the market? Look at all the freaky stuff going on in the economy - it might get a lot worse before it gets better.

Finally, now would be a great time to return to classic fundamentals of buying real estate. You shouldn't have to pay more than 25% of your income towards your house. Lenders let that number creep up to 50%, and that's why you see foreclosures all around. The 25% rule is even more important in a recession with bailouts happening left and right. Don't put yourself in a situation where you would be screwed if you or your wife were to be out of work for a few months.

 

Hey SwoLy-D, my wife is a realtor and does quite a bit of business in Katy (she helped Harrissment buy and sell his house recently). I sent you her contact info through the board.

 

Just put your wheels back on your home and move to another lot cabron. Im placing my home on the market in December........do you want to buy it? Youve seen it.....I'll throw in the dogs.

 

Actually I'm the headache for my friends - I'm extremely financially conservative. =) I'm sorry I misread the 5% - I've seen too many 0% down deals and my eyes just glazed over.

To answer your question - you pay off $173K by putting about $80K down first - and both of you have to REALLY hate being in debt.

Finally, the reason I brought this back up is that I appreciate that you took my post in the manner I offered it - and I thought that it was relevant given what we've seen in the market today. We could well be heading into a soft depression if the government doesn't come up with a fix.

Now is a VERY good time to have a very manageable house note like you currently have - and what I said about the real estate market...well, you can imagine what it's going to do if unemployment rises like it would in a depression.

Cliff's notes on the current crisis: companies need short-term loans to operate, banks need loans from other banks to sell mortgages, we all need credit. Right now, the credit market is almost frozen. Banks won't lend to other banks because they don't trust the other banks' stability. If your company can't get short term credit, it can't pay its bills. That means that it has to cut costs. Some companies will do this by cutting their workforce. People lose their jobs, stop spending, and abandon mortgages. Now the crisis gets worse because the questionable assets that the banks have are worth even less. It all spirals downward.

 

Did you ever figure out what to do? My $0.02...

Now is a terrible time to sell, IMHO, anywhere...I've done the 80/10/10, similar to you, so when I sell my place, I have to pay off my adjusted 80/10 (1st and 2nd mortage)...

Now, if you're looking to sell, let's just hope you sell it for more than what you owe on it...Now as for buying another house, if you can afford it comfortably, by all means buy it, actually its a great time to buy, but not at the expense of selling your house at a loss...

Now, as for how much you owe, just call the bank and find out your bottom line owed on both loans...6 years of pmts are more than likely mostly applied to the principal so depending on the market you may owe...

Hope it works out...

 

These days, you're doing good if you can get an offer and not have to bring money to closing.

That being said, Houston is still doing pretty well compared to other cities. You can still find a buyer here a lot easier than anywhere else.

People say 'credit is tight' but all that means is that people who make 25K a year can no longer qualifiy for a 500K mortgage like they could 5 years ago....

I'm currently paying 2 mortgages. Not fun. Luckily, both of them are very manageable. Neither have PMI and both are locked into very low interest rates. But is sure would be nice to only have to pay one.