Can I Sell My House When I Still Owe Mortgage?

Can I Sell My House When I Still Owe Mortgage?

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For sale sign in front of a house in Los Angeles, CA – Local Records Office

If you sell your house for more than you owe on the loan you will more than likely make a profit and walk away with a decent percentage. There have been cases where the property owner sells the house for more than what is owed. But the seller doesn’t see a dime from it or even owes money when closing. The company Local Records Office created a list to see if you’re going to make or lose money when selling your house.


Where Do You Get Hit the Hardest When You Close Deal?


Let’s get this out of the way; you will get hit hard when you close the deal, that’s just how it goes. Traditionally there will be a middleman that will take the buyer’s money, usually a title company, attorney, or an escrow company, depending on where the property is located. This money will be used to pay off the seller’s mortgage.

“Many people don’t realize that a middle person or company will take a big chunk of the asking price.” says, Ben Clark, a senior broker of Water Pines Real Estate Brokers in SoCal. Other people will be paid first before seeing if you’ll make a profit first.


What Are the Most Common CommissionFees?


People need to be paid commissions before the seller sees a profit. The real estate agent and the buyer’s agent both take a chunk. 5% is the typical commission that real estate agents will take when a deal is closed. Typically the percentage will be outlined in the agreement that you signed when the seller was hired to get the job done. If all the people or companies involved don’t get paid with the extra money you will have to pay them out of pocket. No one wants to pay out of pocket when it comes to these things but it has to be done.

Commonly the escrow company, title company, or lawyer who is taking care of the closing will also take their percentage.

“It’s not as easy as buying something at a store where you have a buyer, supplier, and seller. A lot more goes on behind the scenes.” says, Clark.


What Are the Closing Costs?


In most cases, the buyer pays the majority of the closing costs while the seller is left to smaller fees. The most common percentage is 1% of the closing price of the property but can go up as high as 3%. Other fees like insurance premiums and recording fees can also add up.

“Fees can up very quickly, and leave your wallet empty. The more the property is worth the higher the fees the buyer and seller will pay” says, Clark.


Still Owing Taxes on the Property


After all the agents get paid you and all the fees are taken care of it’s time to pay taxes on the property. In most states, taxes are paid in advance, usually a year or two, and are paid in arrears. What does this mean? The property taxes that a homeowner is paying in 2019 are really for the year prior.

In most states, the buyer isn’t responsible to pay the arrears so that means the seller will have to pay a year or two of property taxes. Property taxes vary on the location but they usually start at $50. The low fee of $50 will be for a property located in the middle of nowhere. In areas like downtown Chicago or downtown Los Angeles, a $300 monthly property tax fee is common. $300 might not seem like a lot of first but it will add up quickly. When 2 years of $300 a month needs to be paid all at once, that a whopping $7,200. If you see any money after all of the fees are paid, congratulations.