QUESTION: Can a home seller sell a home for less than its mortgage?
ANSWER: Yes, in some case you can sell your home for less than what you still owe on the mortgage. But it is complicated and depends on the lender. This situation is known as a "short sale." Sometimes a lender wilL be willing to split the difference between the sale price and loan amount, which still must be paid. A short sale may be more complicated if the loan has been sold to the secondary market because then the lender will have to get permission from Freddie Mac, the two major secondary-market pLayers. If the loan was a low down payment mortgage with private mortgage insurance, then the lender also must involve the mortgage insurance company that insured the low-down loan.
QUESTION: When does foreclosure begin?
ANSWER: Lenders will initiate foreclosure proceedings when homeowners become delinguent in their mortgage obligations, usually after three payments are missed. The lender will then notify the buyer in writing that he or she is in default. The lender can request a trustee's sale or a judicial foreclosure, in which the property is sold at public auction. A borrower can cure the default by paying the overdue amount and the pending payment after the notice of default is recorded, usually no later than a few days before the property's sale. Some sales alLow the successful bidder to take possession immediately. If the former owner refuses to vacate the premises, the court can issue an unlawful detainer that allows the sheriff to come out and evict them. Borrowers should do everything they can to avoid foreclosure, which is one of the most damaging events that can occur in an individual's credit history.
APPRAISALS & MARKET VALUE
QUESTION: How is a home's value determined?
ANSWER: You have several ways to determine the value of a home. An appraisal is a professional estimate of a property's market value, based on recent sales of comparable properties, location, square footage and construction quality. This service varies in cost depending on the price of the home. On average, an appraisal costs about $300 for a $250,000 house. A comparative market analysis is an informal estimate of market value performed by a real estate agent based on similar sales and property attributes. Most agents offer free analyses in the hopes of winning your business. You also can get a comparable sales report for a fee from private companies that specialize in real estate data or find comparable sales information available on various real estate Internet sites.
QUESTION: What is the difference between market value and appraised value?
ANSWER: The appraised value of a house is a certified appraiser's opinion of the worth of a home at a given point in time. Lenders require appraisaLs as part of the loan application process; fees range from $200 to $300. Market vaLue is what price the house will bring at a given point in time. A comparative market analysis is an informal estimate of market value, based on sales of comparabLe properties, performed by a real estate agent or broker. Either an appraisal or a comparative market analysis is the most accurate way to determine what your home is worth.
QUESTION: What standards do appraisers use to estimate value?
ANSWER: Appraisers use several factors when estimating a home's value, including the home's size and square footage, the condition of the home and neighborhood, comparable local sales, any pertinent historical information, sales performance and indices that forecast future value. For detailed information on appraisaL standards, visit the Appraisal Institute website, appraisalinstitute.org, or contact the organization at 550 W. Van Buren St., Suite 1000, Chicago, IL 60607; (312) 335-4100.
QUESTION: What's a house worth?
ANSWER: A home ultimately is worth what someone will pay for it. Everything else is an estimate of value. To determine a property's value, most people turn to either an appraisal or a comparative market analysis. An appraisal is a certified appraiser's estimate of the value of a home at a given point in time. Appraisers consider square footage, construction quality, design, floor plan, neighborhood and availability of transportation, shopping and schools. Appraisers also take lot size, topography, view and Landscaping into account. Most appraisals cost about $300. A comparative market analysis is a real estate broker's or agent's informaL estimate of a home's market value, based on sales of comparable homes in a neighborhood. Most agents will give you a comparative market analysis for free. You can do your own cost comparison by looking up recent sales of comparable properties in public records. These records are available at local recorder or assessor offices, through private real estate information companies or on the Internet.
TAX CONSIDERATIONS
QUESTION: Can I deduct the loss I suffered when I sold my home?
ANSWER: The Internal Revenue Service currently does not allow deductions for losses on the sale of your own home. In fact there's no way to use a loss on the sale of your principal residence to your advantage on your income tax return.
WHOM TO CONTACT
QUESTION: How do I reach the IRS?
ANSWER: To reach the Internal Revenue Service, call
(800) TAX-1040; irs.gov.
QUESTION: Where do I get information about closing costs?
ANSWER: For more on closing costs, ask for the "Consumer's Guide to Mortgage Settlement Costs," Federal Citizen Information Center, Pueblo, CO 81009; (888) 878-3256; pueblo.gsa.gov.
QUESTION: Where do I get information on housing market stats?
ANSWER: A real estate agent is a good source for finding out the status of the local housing market. So is your statewide association of Realtors, most of which are continuously compiling such statistics from local real estate boards. For overall housing statistics, U.S. Housing Markets (meyersgroup.com) regularly publishes quarterly reports on home building and home buying. Your Local builders association probably gets this report. Finally, check with the U.S. Bureau of the Census in Washington, D.C.; (301) 763-3199; census.gov. The Chicago Title company also has published a pamphlet, "Who's Buying Homes in America." Write Chicago Title 601 Riverside Ave., Jacksonville, FL 32204; (888) 934-3354; ctic.com.
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