Yes, you can sell your home even if you still owe the bank money. Most people who sell their houses have a mortgage balance.
The money from your sale pays off the loan first, and you keep the rest. If you are asking, “can you sell a house before paying it off,” the answer is a simple yes.
According to the Federal Reserve Bank of St. Louis, there are currently over 4,000 homes for sale in a complex Memphis real estate market. Read on, and we’ll explain the ins and outs of selling your home with a mortgage.
What Is the 6 Month Rule for Property?
The “six-month rule” often applies to buyers using FHA loans. Banks often want you to own the home for at least six months before you sell it to someone else using a mortgage. This rule is meant to stop people from flipping houses too quickly.
If you inherited a home and need to sell it fast, this rule might slow you down. Traditional buyers may find it hard to get a loan if you haven’t owned the house long enough.
Selling to a cash buyer helps you skip this problem entirely. Cash buyers do not have to follow these strict bank rules.
What Happens When You Sell Your House Before You Pay Off Your Mortgage?
When you sell, your loan is paid off during the closing process. Your title company will ask your bank for a payoff statement. This shows exactly how much money you still owe.
This statement includes:
- The loan balance
- Daily interest charges
- Any fees for closing the account
- Penalties for paying early
Once the buyer pays for the house, that money goes to your lender. The bank then releases the lien on your property.
Can You Sell a House Before Paying it Off in Memphis?
In Memphis, selling a house with a loan is very common. You do not need to ask your bank for permission to put your home on the market. As long as the sale price covers your debt, the process is simple.
The law protects you and the buyer during this transaction. The title company makes sure the bank gets its money before the title moves to the new owner. This allows you to walk away with a clean slate.
Exploring Your Mortgage Payoff Options
Your options depend on how much equity you have in the home. Equity is the difference between the home’s value and what you owe. You should look at all your choices before you list the property.
Common options include:
- Standard sale where you keep the profit
- A short sale if the house is worth less than the loan
- Selling for cash to avoid repair costs
If your home needs many repairs, a traditional buyer might not be able to get a mortgage. A cash buyer is a great option here because they buy the home as-is.
This means you do not have to fix anything to pay off your debt. It can be one of the best mortgage payoff options for distressed homes.
Selling With Mortgage: Understanding Your Equity
When you are selling with mortgage debt, your equity determines your profit. If the property value has gone up, you will walk away with cash. However, if the house has damage, the value might be lower than you think.
Many Memphis owners find that repairs eat into their equity. A leaking roof or bad plumbing can make a home hard to sell to a family.
You might have equity on paper, but you can only access it if someone buys the house. Selling to a cash buyer lets you unlock that equity without spending your own money on renovations.
The Reality of a Prepaid Home Sale
A prepaid home sale involves costs you pay at the closing table. These costs are taken out of the money you get from the buyer. You need to account for these so you aren’t surprised by a smaller check.
These costs often include:
- Unpaid property taxes
- Title insurance
- Escrow fees
- Recording fees
Most traditional sales also require you to pay a real estate agent a high commission. This can take away 6% of your sale price.
When you sell to a cash buyer, they often pay these closing costs for you. This means you keep more of the sale price.
Selling an Unfinished Mortgage During Foreclosure
If you are behind on payments, you can still sell your home. You can keep selling unfinished mortgage debt until the bank officially takes the house at an auction. This is a very smart move to protect your credit score.
A foreclosure can ruin your ability to buy a home for many years. Selling the house allows you to pay off the bank and stop the legal process.
You must move quickly if the bank has already started the foreclosure. A cash buyer can close much faster than a traditional buyer can.
The Traditional House Selling Process
The traditional house selling process in Memphis can be very slow. It often takes months to find the right buyer. You have to keep the house clean and let strangers walk through your rooms.
Steps usually include:
- Hiring a real estate agent
- Fixing all the damage in the house
- Waiting for an offer
- Waiting for the buyer’s bank to approve their loan
If the bank finds a problem with the house, they may deny the loan. This can happen at the last minute and ruin your plans. This stress is why many people look for a faster way to sell.
Benefits of Selling to a Memphis Cash Buyer
Selling to a company like We Buy Houses Memphis is much easier. You do not have to deal with the “six-month rule” or picky banks. We use our own money, so the sale is guaranteed.
The benefits include:
- You do not have to do any cleaning
- You do not have to pay for any repairs
- You can choose your own closing date
- You do not pay any commissions or hidden fees
This is the best way to move on from a property quickly. It works well for tired landlords or people moving out of state. You get a fair price and a simple closing.
How the Cash Sale Works for You
We have made our process very simple for Memphis homeowners. We know you want to settle your debt and move on. We handle all the hard parts for you.
The process works like this:
- You contact us with your property details
- We visit the home to see its condition
- You get a cash offer within 24 hours
- We close at a local title company on your schedule
We talk to your mortgage company to get the payoff amount. We make sure everything is legal and fast.
FAQs
What Happens If I Owe More Than the House is Worth?
If your mortgage is higher than the sale price, you have a few choices.
You can pay the difference at the closing to clear the debt. You can also talk to your bank about a short sale. We can help you look at your situation to see what works best.
Do I Have to Pay Taxes on the Sale?
You usually only pay taxes if you make a large profit on the sale.
If the house was your main home, you might not owe any federal taxes on the first $250,000 of profit. You should talk to a tax professional to be sure. Most people selling a distressed or inherited home do not end up owing much in taxes.
Can I Sell If I Have a Second Mortgage or a HELOC?
Yes, you can. Any second mortgage or line of credit is a lien on the house.
These must be paid off at the closing just like your main loan. The title company will get payoff letters for all your loans. The total amount will be taken from the sale price.
Will You Buy My House If It Is Currently a Rental?
Yes, we buy rental properties all the time. We can even buy the house if there are tenants still living there.
You don’t have to wait for their lease to end. We take over the lease and the tenants, which makes the sale very easy for you.
What If I Inherited the House But the Title Is Not in My Name Yet?
This is a common issue that we can help with. You may need to go through a process called probate to move the title.
We work with local experts who understand Memphis laws. We can help guide you through the steps to get the house ready for sale.
Sell Your House for Cash and Breathe a Sigh of Relief
At We Buy Houses Memphis, we make sure you have the best home-selling experience. We take the stress out of the question, “can you sell a house before paying it off,” by handling the bank for you.
Our unique perk is that we buy houses in any condition, so you never have to spend money on repairs. We are local professionals who offer a fast, fair, and honest way to sell. We pay all the closing costs and close on your timeline.
If you want a fair cash offer for your house, contact We Buy Houses Memphis today!
