Selling a house in Florida can be a stressful and overwhelming process, especially when you have no equity or are upside down on your mortgage. Having no equity means that you owe more on your mortgage than what your home is worth or what a willing buyer would pay for it. It can be a challenging and incredibly stressful situation for homeowners who are trying to sell their homes fast.
We understand this very well, as we have worked with hundreds of No Equity Florida Home Sellers. In this article, we’ll discuss how to sell your Florida house fast with no equity, including alternative options such as subject to financing, lease option to purchase, and leasing.
Understanding No Equity and Upside Down Mortgages in Florida
Having no equity or an upside-down mortgage means that your home’s current value is less than the outstanding mortgage balance. This situation can occur when home values decrease, and homeowners owe more than their homes are worth.
Negative equity can be a significant obstacle for homeowners trying to sell their homes, as they cannot sell their homes for what they owe on their mortgages. Not too mention all the closing costs associated with the sale.
Let’s take for an example:
You bought a house for $325,000. You put 10% down and financed $292,500. You might have owned the home for a handful of years and in that time, you ended up have some principle pay down as well. Now you currently owe $280,000.
Let’s say current market value is $270,000.
You might be thinking… Well, I am $10,000 underwater on my Florida mortgage right? Yes. Kind of. In the state of Florida many times the seller is responsible for real estate commissions which could range 5-7% of the purchase price. You could also be responsible for title fees and title insurance. And the ole tax man – This is called Doc Stamps on the Deed which every seller is responsible for which is .70 for every $100.
Let’s break out the math:
|No Equity Mortgage Balance||– 280,000|
|Commissions @ 5%||– 13,500|
|Title Insurance & Fees||– 2,300|
|Docs Stamps on Deed||– 1,900|
|Net (Negative Amount)||(- $27,700)|
So, based on this scenario, to successfully sell your no equity Florida home, you would have to cut a check at closing in the amount of $27,700!!
This also doesn’t include any improvements needed to do to the property prior to going to market, any repairs you likely will have to do post buyer inspection or a credit for repairs or if you are currently in default and past mortgage payments and fees.
If you find yourself in this situation, it’s crucial to understand the options available to you. One option is to sell your home with no equity like the example above. But many people just don’t have tens of thousands of dollars sitting around. And most smart people in upside down Florida mortgages don’t want to tap into retirement accounts to get the deal done.
But don’t sweat just yet. We are going to talk next on other alternative to sell your Florida house with no equity! And one way how you can sell to us fast!! Even if you have No Equity in Your Florida Home!!
Other Alternatives to Sell Your Florida House with No Equity
If you’re trying to sell your Florida house with no equity, there are options you can explore that will not necessarily cost you anything like the example above.
Sell Your Negative Equity Florida Home via a Short Sale
A short sale is a common option for homeowners with no equity who want to sell their homes fast (or painfully slow). In a short sale, the lender agrees to accept less than what the homeowner owes on the mortgage. The homeowner sells the property for less than the mortgage balance, and the lender forgives the remaining debt.
However, there are a handful of things to consider before considering selling your upside down Florida house via a short sale.
- There is no guarantee that a lender will agree to a short sale.
- There is no guarantee a lender will agree to waive their deficiency judgement. Meaning coming after you for the negative equity balance plus fees.
- A short sale can be a complicated process that involves negotiating with the lender and submitting financial documents, hardship letter, tax returns, paystubs, etc.
- The short sale process can be long and drawn out
- The buyer can get frustrated and walk away from the contract if the short sale process takes too long.
But!! A short sale is much better than a foreclosure! It is a much less hit to your credit and you might qualify to buy another home in 24 months or less in some instances. And it can be a slightly more predictable process.
Negotiate with Your Lender in an Upside Down Mortgage
I know this isn’t really a solution to sell your house fast with no equity in Florida, but it’s best we give you as many options to consider so you and your family can make the most informed decision as possible!
Also, take a look at this video we did that talks more in detail on stopping a Foreclosure in Florida!
- Modify Your Negative Equity Florida Loan. Another option is to negotiate with your lender to modify the terms of your mortgage. A loan modification can reduce your interest rate, extend your loan term, or forgive part of your debt. This is a fantastic option to consider, especially if you want to remain in the property and still have employment / income to cover the new monthly debt payment. This option can be challenging, as lenders are not required to modify your mortgage. However, if you can demonstrate that you’re experiencing financial hardship and unable to make your mortgage payments, your lender may be willing to work with you.
- Deed In Lieu Your Upside Down Florida House. In this scenario you are deeding the property back to your lender. This reduces the incurred costs on the lender’s behalf and reduces time and stress on your behalf. However, it is still wise to pay for your own attorney representation throughout the deed in lieu process and try to negotiate a release of deficiency judgement if possible.
Sell Your No Equity Florida Home FAST to a Real Estate Investor
Selling your upside down Florida house to a real estate investor can be a terrific option. But why would a savvy real estate investor buy a Florida house with no equity? The only real reason is cash flow based on the mortgage and rent values.
So, how we buy no equity homes in Florida is by means of what’s called Subject To Financing. I am going to break this down in easy to understand detail for you. But this is how many no equity Florida home sellers can get out of their scenario Fast and with the least amount of stress and pain. And in some cases, CASH IN YOUR POCKET!!
Let’s take the example from earlier. You owe $280,000 on a house that is worth $270,000. If the loan terms are favorable (IE – Good amortization and good interest rate / payments), we will take over your loan. AKA – Subject To Financing.
The previous example, you were coming out of pocket $27,700. In this example, you will get $5,000 at closing. So, here is the math below showing all our expenses we are responsible for.
|Commission (None as we are direct buyers)||$0|
|Title Insurance & Fees (We Pay For)||$2,300|
|Doc Stamps On Deed (We Pay For)||$1,900|
|Back Mortgage Payments – Only One Month in Arrears (We Pay For)||$1,150|
|Happy Seller Fee To You! (We Pay For)||$5,000|
|Fix Up Property (We Pay For)||$12,000|
|Total Out Of Pocket For Us||$22,350|
|** Your Current Mortgage Terms: $280,000 @ 2.8% = Principle & Interest Payment = $1,150 per month|
In this scenario we are buying the property for $280,000 which is your loan amount that we take over. We are paying for the closing costs and there are no commissions as we are direct buyers. Because you were only one month in arrears we were able to get you even more at closing and you got a check for $5,000!! And based on our walkthrough, we figured it will take about $12,000 to the house into rent ready condition. So, our total out of pocket is $22,350.
Remember, this is an actual closing where the deed transfers, title is insured and everything transacts like a traditional sale.
How We Make Money By Buying No Equity Florida Houses
Ok… Now that you understand how we bought your negative equity Florida house, let’s talk about how we make it make sense for us.
Below is our rental scenario. Remember, we are taking over your existing mortgage and leasing the property out after we fix it up.
|Current Rent Rate||$2,750|
|Mortgage Payment||– 1,150|
|Real Estate Taxes||– 250|
|Management (10%)||– 275|
|Reserves (10%||– 275|
In this example, after all costs we net $550 per month x 12 months = $6,600. Based on our cost to purchase the upside down Florida house, it will take us about 3.4 years to recoup our funds. [ $22,350 / $6,660 = 3.4 ]. This is assuming nothing major comes up or multi month vacancies.
This has been a beneficial solution for many negative equity Florida home sellers as it gets them caught up in arrears, stops negative reporting on credit, eliminates financial devastation with a short sale, foreclosure, deed in lieu of foreclosure or even a bankruptcy.
Also, in this scenario you will not have to prepare the home for sale, no repairs will be needed and closing can be fast. Unfortunately not all scenarios make sense for us to purchase via a Subject To Mortgage. However, we will consult with you and at least brainstorm with you other ideas. You can get a FREE Consultation on your No Equity Florida Home, HERE>
Solutions to Hang On To Your No Equity House in Florida
Now… If you are current on your mortgage, you might want to consider hanging on to your negative equity house in Florida. There are two main ways to do this. One is more management intensive and the other isn’t.
Lease Your Upside Down Mortgaged Property
Just because you are upside down on your Florida mortgage based on selling it, doesn’t mean you are in a negative equity cash flow position if you lease it. No equity doesn’t mean no cash flow!!
In this scenario, you can use the expense sheet above to figure out your net amount. Be sure to account for management and reserve fees. Leasing your property gives you the opportunity to build wealth using real estate as your asset. Real estate ownership not only gives cash flow benefits but you also reap the rewards of depreciation which is an excellent tax write off tool.
Now… Here is the downside. Tenants can destroy a property. Tenants can stop paying you rent. Tenants can invite unknown people not part of the lease to occupy the property. This is why we always include management fee to take care of this. Being a landlord and a manager of your property can be stressful. So, account for this.
Have No Equity in Your Florida Home – Lease Option to Purchase
If you want to hand on to your no equity Florida home, a lease option to purchase agreement is a fantastic strategy as well. The buyer leases the property for a set period and has the option to buy the property at the end of the lease term. The buyer pays an upfront option fee and a monthly rent payment, which can be applied toward the purchase price. The option fee can be non refundable if the buyer doesn’t exercise their right to purchase after / during the lease term.
This option can be a win-win for both the buyer and the seller. The seller can generate income from the lease payments, and the buyer has time to build up their credit score and save for a down payment. You can also negotiate the leasee / buyer is to handle all maintenance and repairs of the property up to a certain amount of money. This way, you do not get calls late into the night about a leaky toilet.
The downside of a lease option is the tenant not taking care of the property like mentioned above. And in many cases, they have some “issue.” If they didn’t have some sort of issue, they would just apply for financing and buy the property. These issues can include bad credit, foreclosures, bankruptcies, unemployment or lack of employment and even citizenship issues.
Where We Buy No Equity Homes in Florida
Steve and Joleigh are buying NO EQUITY HOMES throughout Florida including but not limited to Naples, Bonita Springs, Fort Myers, Cape Coral, Fort Lauderdale, Siesta Key, Port Charlotte, Punta Gorda, St. Pete, Clearwater, Orlando, Sebring, Merrit Island and many other areas throughout the state.
Selling a Florida house with no equity can be a challenging situation for homeowners. However, based on reviewing this article if you made it this far, you do have options and you are not alone. Below you will find a simple form. Once received we will call you within 24 hours to consult and talk details about your property.
Selling your Florida home with no equity can be a complex process, but with the right team and strategy, you can sell your home quickly and move on to your next chapter. We look forward to meeting with you!