How can a homeowner sell they house for less than whats owed on it?

Question

Because I'm trying to figure out if someone sale me their house for $100,000 but you owe $250,000 to your lender....where do I stand with the rest of the loan and where do the seller stand?

Answer 1

The seller can quit claim the house to whomever for whatever price. However, the lender would want their 250k and if they don't get it, they will foreclose on the house. So I wouldn't do this unless the house was worth at least 350k and then I would go through lawyers or escrow (or whatever is the norm in your area).

If this is a short sale, and the lender (for some weird reason) agrees to such a huge loss, then you will need to pay the lender 100k and your friend gets nothing, unless this was a FHA loan, where he would only get $1000.

Regards

Answer 2

The seller could ask the bank to grant him a short sale, but I doubt that the bank is going to take that kind of loss unless it was proved to them that the house was in very bad condition. You will need to have a BPO or an appraisal done. most likely this is too much of a variance in price for this to happen. Does the seller plan on bringing 150k to the closing? That's the only other way.
Good luck

Answer 3

If you are buying - you only need to worry about the 100,000
As the seller - they are still liable to the lender for the 250,000 (they would need to continue to make payments to the lender or as many have done......file bankruptsy)

Generally something like this would happen is home values significantly declined.

Answer 4

The seller must come to the table with the rest of the money!

Answer 5

Owner can't sell the house to you, until he pays of the mortgage lender in full...

this sounds shady..... in today's market, no house would loose that much value, unless, something crazy happened....

Answer 6

why would someone sell at such a huge loss?

Answer 7

This would be a case where buyer should be aware.