can I sell my house while in forbearance 1

Can I sell my house in forbearance?

Yes! – you can sell your house in forbearance. And if you sell to a home buyer that knows what to do, it can be pretty straightforward. Of course, you must always know all the details about selling, especially if your house is in forbearance. 

Because of this, I have put together this complete guide on selling your house while in forbearance. 

Shall we get started?

Can I Sell My House While in Forbearance?

Can I Sell My House While in Forbearance

Although you are not obligated to sell your house when you go into mortgage forbearance, the thought will be at the top of your mind.

By the time you get a deferment on your regular monthly mortgage payment, the struggle to keep up may have already taken its toll on you as a borrower.

The situation deteriorates if you can’t figure out how you will resume your repayment plan and settle the deficit when the forbearance period lapses.

can I sell my house while in forebearance

You will naturally start questioning if you can offload it to a cash buyer if you get the chance to raise the mortgage balance and cover the deferred payments.

You figure you would rather make a small profit to start over than wait for the foreclosure process and lose everything.

The easy answer is yes. You can sell a house while in forbearance. As to whether it will be the right move under your circumstances, we can’t tell yet.

The selling process for a house in forbearance is different depending on its equity distribution. Keep reading for options and strategies to help you come out on top of the sale.

Table of Contents

How Does Owner’s Equity Affect the Sale of a House in Forbearance?

can I sell my home while in forebearance

Selling a house in forbearance differs when the house’s market value exceeds the outstanding amount of the mortgage in forbearance from when it falls short.

When the House’s Market Value Is Higher Than the Mortgage Balance

This means you have enough equity in your property to cover the deferred payments, the loan balance, and any other fees associated with settling the mortgage as it stands. This position is considered above water in the real estate world. Selling the house in this situation is simple and straightforward, almost as if you didn’t have forborne payments.

The only difference with a regular sale is that all the deferred payments are due to the lender once the sale is closed. They will be paid directly from the proceeds.

sell your house when mortgage balance more than home

When the Balance of the Mortgage in Forbearance Is More Than the Home Value

This is a negative equity position, also called underwater in real estate jargon. It means you don’t have enough equity in the house to cover the mortgage and the missed payments. This complicates the sale significantly. The mortgage lender should be informed as soon as the appraisal report comes in so you can chart the way forward.

The easiest solution would be to top up the difference between the house’s value and the mortgage balance from other sources. The mortgage being in forbearance is a sign of struggle, meaning the funds might not be available.

There are also other costs, such as realtors’ commissions and sale closing fees, to contend with. You might be forced to strike another bargain with the lender to avoid foreclosure.

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A Short Sale

In this arrangement, the lender allows you to sell the house at the prevailing market rate even though it is less than what you owe. You will be eligible for this option if you don’t qualify for a loan modification. It does not automatically free you from paying the outstanding amount, though.

Many lenders will need a repayment plan to cover the difference before approving the short sale. Spreading the significantly reduced loan over a longer period makes it easy to pay.

Ironically, the short sale requires a longer period than a normal sale. The processes are many, starting from seeking the bank’s approval before you can even begin listing. The bank will have to conduct its own inspection and get the house’s latest appraised value before making a decision.

A short sale impacts your credit score negatively, but it is better than foreclosing as lenders can still consider you for facilities.

Deed In Lieu of Foreclosure

This is the last resort if you cannot actualize the short sale for one reason or another and still can’t pay off the mortgage. You willingly surrender the property title to the lender as payment for the loan to prevent foreclosure. A foreclosure appearing in your credit report will have you blacklisted by lenders, restricting access to credit for a long time.

The lender can recoup a significant part of their loan from the property, and you will be released from any outstanding liability relating to the mortgage. A Deed in Lieu also has an adverse effect on your credit score but is not as bad as a foreclosure.

Turning over the ownership of your house to an investor or lender can be traumatizing. You may be forced to vacate the house immediately after giving it up.

The US Government’s Consumer Financial Protection Bureau (CFPB) even advocates for consultation with a housing counselor who has been approved by the Department of Housing and Urban Development (HUD) to plan your next steps after losing your house in this manner.

forbearance word from wooden letters

Knowing Your Current Position

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When the house is in forbearance, you should be constantly updated on the state of your equity so that you can make plans for the way forward before the forbearance period lapses.

Understanding the Terms of the Mortgage Forbearance Agreement

This is the contract you sign with the lender that captures the lender’s offer to relieve you of your monthly contributions and a payment plan that will eventually get you caught up on the payments.

The lender can reduce the monthly payments or suspend them completely for a specified period of time. They agree not to foreclose on the loan during this period as they would otherwise do on a delinquent mortgage loan.

The agreement specifies how much you will owe at the end of the forbearance and how you should pay it off, which helps in budgeting.

At the end of the forbearance period, you should resume your monthly payments plus a lump sum of the suspended payments, or you can spread them over a number of months and pay something extra on top of your scheduled contribution.

Some lenders allow you to load them at the end of the mortgage, extending the repayment period.

This information is important if you are planning on selling the house. It tells you how much will be expected from the proceeds of the sale to regularize the account or clear the mortgage altogether.

Payoff Demand Request

A payoff demand on your property is essentially a breakdown of how much you owe on the property or a total of what is due to the lender.

The statement includes the outstanding loan balance, any charges, interest and most importantly, the payments that have been deferred under the forbearance agreement.

This is the figure that the proceeds from the sale should settle before the mortgage account can be closed.

Cost of Selling the House

As much as it is currently a sellers’ market, offloading a house still comes with related costs, which should be factored in as you consider selling a house in forbearance.

There are attorney fees to consider and transfer taxes, among other expenses, which collectively range between four and five percent of the selling price. Add realtor fees at six percent, and we are looking at a ten percent budget for the selling price.

Comparative Market Analysis (CMA)

You can get these reports from any real estate agent highlighting listing prices in particular neighborhoods. They will give you an estimate of the kind of offers you should be expecting for the house from similar properties that have been listed recently.

The proceeds from the sale will clear what is on the payoff demand, then the costs of selling the house and the balance (if any) will be your take-home.

Discuss what your home is worth with the realtor, run numbers and get a net sheet based on what you owe on the property so that you know exactly what you will walk away with at the end of the sale.

Valid Reasons to Sell Your House in Forbearance

Taking Advantage of a Sellers’ Market

In a sellers’ market, there are more buyers than the homes that are up for sale. The demand pushes the overall selling price of houses higher.

Homes start selling for more than their asking price, with multiple offers. Your home can be extremely saleable, and you can make a nice profit even after covering the mortgage, forbearance payments, agent fees and closing fees.

Real estate is one of the sectors where the coronavirus pandemic’s economic effects were felt. It sent Americans into a home-buying frenzy in 2021 as companies embraced working from home.

Traditional city dwellers were rushing to find less crowded areas to settle in while home construction struggled to keep up, ironically because of coronavirus restrictions.

People feel more grounded now that they don’t have to stick to a specific time zone or location. This makes them want to settle.

The prices don’t seem to be going down, making this a good time to sell if you bought the house a while back and are struggling to meet the monthly obligations.

Paying Off the Forbearance

If you are heading towards the end of the forbearance period and still unable to make the payments, selling might be the only viable option to pay off the mortgage.

As soon as the forbearance period expires, late fees and penalties will be applied to the account, pushing you further behind on your payments.

To Downsize Your Home

Downsizing helps reduce your expenses to an affordable level, and you should take advantage of the forbearance period to lay the groundwork for moving.

If you keep falling behind on your loan payments, you erode the existing home equity and, by extension, what you will get from selling it.

you can sell your house while in forbearance

Conclusion

You can sell your house while in forbearance.

Be aware that it takes time to accumulate equity if you keep falling behind on the mortgage payments and this erodes the existing four walls of your house. You might be thinking of how to “sell my house for cash”? We Buy Houses In Denver is your solution to selling your house fast. Fast and painless, that’s what we are because we’re the number one cash home buyer in Denver!

“I wanted to sell my house for cash”. Contact us now or fill out an online form and our team of experts will get to work, quick and smart, to help you get your house SOLD!

sellers market home house for sale sign 3d illustration

Forbearence FAQ's

Yes, you can sell your house while in forbearance. Selling your while in forbearance is straightforward you sell to an experienced buyer.

The mortgage and fees associated with the forbearance will be paid off at closing. The remaining balance would then be transferred to you. 

For more information on selling your house while in forbearance, check out this guide by a real estate expert with 20 years of experience. 

Yes, you can sell your house with a reverse mortgage. Selling your with a reverse mortgage is straightforward you sell to an experienced buyer.

The reverse mortgage and fees associated with your house will be paid off at closing. The remaining balance would then be transferred to you. 

For more information on selling your house with a reverse mortgage, check out this guide by a real estate expert with 20 years of experience. 

Yes, you can sell your house if you are behind on mortgage payments. Selling your home when you are behind on the mortgage is straightforward you sell to an experienced buyer.

The mortgage, associated late fees, and penalties will be paid off at closing. The remaining balance would then be transferred to you. 

If you are behind on your mortgage, you might need to sell your house quickly. If you are in a hurry to sell, you must consider selling for cash because a cash sale is the fastest way to sell your home. 

You can get a no-obligation cash offer to sell your house today from us at WeBuyHousesInDenver.org, the local home buying company in Denver you can trust. 

For more information on selling your house when you are behind on payments, check out this guide by a real estate expert with 20 years of experience. 

Yes! You can sell your house to a cash home buyer if your property is in forbearance. 

If you are in forbearance and would like a no-obligation cash offer, you must fill out a form at WeBuyHousesInDenver.org, and our friendly real estate experts will get it done for you. 

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