Dumping an Over-leveraged Home Without Doing a Short Sale

Dumping an overleverage home without doing a short sale
dumping an over-leveraged home without doing a short sale
Dumping an Underwater Over-leveraged Home Without Doing a Short Sale

There are a couple options for dumping an over-leveraged home apart from a short sale.

Not every seller qualifies for a short sale. Same as not every underwater / over-leveraged home is a strong candidate for a short sale.  Know that there are a couple of options for dumping an underwater over-leveraged home apart from a short sale.

Take Maria’s home, for example.  Maria bought a home in Sacramento in 2005, and she put down more than $100,000 in cash.  She made a few minor improvements and updated the kitchen.  Maria is unable to sell her home for the amount she owes due to declining markets. There is also the fallout from subprime loans and rising interest rates. Her home is underwater.  

Should Maria do a short sale? A short sale is when a home is sold for less than the amount due on the mortgage. A short sale in real estate is not always a pleasant transaction. However, the concept has come a long way since 2006. The current state of the economy does not rule out the possibility of short sales. For example, a person who purchased a brand new home may die the day after closing, and the costs of an immediate sale may cause the transaction to become a short sale.

First, Maria does not qualify for a short sale.  She has no financial hardship.  She just has an underwater home.  Second, Maria does not want her credit rating to be affected or her FICO scores to fall.  Short sales affect credit.  Third, Maria wants to buy another home.  She feels that her neighborhood has deteriorated over the years and, as a single woman homebuyer, Maria no longer feels safe in her neighborhood.

What are her options?

Strategic Short Sales

strategic short sale is a short sale without hardship. To begin, understand that there is no guarantee that a bank will agree to accept a short sale and release the loan under any circumstances, let alone those that do not involve a hardship. Every bank is unique and investor guidelines differ. That’s why it is called a strategic short sale because it’s planned, calculated, and approved by the short sale bank. And this typically happens in exchange for a big cash incentive paid to the bank by the seller.  A strategic short sale is an alternative for sellers like Maria with an underwater home.

For example, if Maria rented out her underwater home, she would receive about $1,500 a month.  Her mortgage payment, plus taxes and insurance amount to $2,200 per month.  Not counting vacancy factors, maintenance, or unexpected repairs, Maria would pay $700 a month to support her underwater home as a rental.  Over 10 years, that’s $84,000.  At the end of 10 years, Maria might not yet have reestablished any equity.  She might still be in the red.

If Maria offers anything less than $84,000 to the bank to release her from her loan and the bank accepts that offer, Maria could very well be ahead of the game.  Apart from the time-value-of-money, Maria might not have to sell her underwater home to strike a deal with the bank.


I don’t believe a deed-in-lieu of foreclosure option is much better than a foreclosure, except that it shortens the period of time to wait before buying another home by about a year.  Homeowners who are unable to make their mortgage payments are not always able to sell their properties for enough money to cover the remaining balance. If the lender is willing to agree to such an arrangement, one solution is to sign over the home to the lender. A deed-in-lieu tends to favor the bank and not the homeowner.

Exchange of Security

If a homeowner owns other property free and clear, the bank might be agreeable to swapping the security for the loan from the underwater home to the home without a mortgage.  By switching out the security for the loan, the homeowner might sell the underwater home at a reasonable price without a loan in place.

Sell With Creative Financing

You might ask yourself who would want to buy an underwater home, but there are people who purchase underwater homes every day.  Maria might be able to sell on a WRAP-around mortgage (owner financing) to a buyer with credit issues and strapped for cash but able to afford the monthly payments and sell for a premium price. It’s buying hope and buying time for a rebound.

We offer creative solutions such as these all the time.  The most popular transaction in today’s market is placing an underwater overleveraged home under contract with a WRAP mortgage. and then marketing this property for sale with creative financing strategies.  We have a lot of “credit challenged” buyers looking for the opportunity to own a nice home all over Texas.  They have a small down payment and can afford the monthly payments and appreciate the opportunity.  The home sellers are happy because they SOLD their homes they couldn’t otherwise sell or maybe they were behind on payments and heading towards foreclosure.  To learn more, download our FREE Special Report called Selling Your Overleveraged House.

We buy houses in Fort Worth and surrounding areas for cash and/or take-over payments and would love to help you during this difficult and stressful time and prevent foreclosure.

In Summary

You see, there are other options for dumping an underwater over-leveraged home aside from a short sale. Armed with the above knowledge on foreclosure effects in Fort Worth – what sellers need to know, you can guard yourself by calling TMC Property Solutions at (817) 550-5069 Opt# 4 and we shall assist you in the shortest time possible to sell your house and avoid foreclosure in Fort Worth and the surrounding cities. However, to fast-track, the process, kindly fill out our website contact form to give us more information about you. We’d love to connect with you and help you find the best solution!

If we can’t help you, we probably know someone that can, so give us a call today.

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