The Challenge of Selling a Home When You Owe More on Your Mortgage than What Your Residence is Worth

You never want to be underwater on your mortgage loan, especially when you are trying to sell your home. Unfortunately, there are Chicago homeowners scattered across the city who are in this situation, owing more on their mortgage loans than what their homes are worth.


Crain’s Chicago Business recently ran a feature story highlighting several Chicago-area communities in which a large percentage of homeowners were underwater on their mortgages. The five communities that had the greatest percentage of these underwater loans were all south suburban areas. But that doesn’t mean that this isn’t a problem for homeowners in the city of Chicago itself, too.


Citing numbers from Attom Data Solutions, the Crain’s story said that 22.5 percent of homeowners across the Chicago area were seriously underwater in the second quarter of this year. Attom considers homeowners seriously underwater when they owe at least 25 percent more on their mortgage loans than what their homes are worth.


That leads to the big question: What can you do if you have to sell your home when you are underwater? Unfortunately, you don’t have many options. You might have to resign yourself to taking a loss when you sell.


If your home is worth $250,000 in today’s market and you owe $280,000 on your mortgage loan, you will probably lose money in the sale. Potential buyers don’t care how much you owe on your loan or how much you paid for your condo or single-family home 10 years ago. All they care about is what the home is worth today. You can’t expect buyers to pay more than market value for your home.


If you don’t have to sell, it makes financial sense to hold onto your home until you pay off more of your mortgage or your residence increases in value. The longer you can hold out until selling, the higher the odds — though nothing is guaranteed — that your loss will be less.


You should also work with a REALTOR® who knows your neighborhood. This REALTOR® can help stage your home so that it shows at its absolute best. This professional can also help you set the best possible asking price – designed to attract the best offers – and market your home to as many potential buyers as possible.