selling house for less than mortgage

What are fees like with selling a house !nd what happens with the mortgage if the house sells for less than you owe? It's ob the market now as we have started a life in a new country and struggling with money too much to keep it as a rental and are trying to decide how much to let it go for. We have a figure for advertising already so just info on bank fees !nd lawyers would be great if the house sells for round 370k

The fees arent a huge amount. We just sold our house privatley, and were on a fixed term so no penalty fees there but I think we have to pay $100 for something. Lawyer is about $2K, I think if its just a straightforward sale?

If you dont get back as much as the mortgage is, I guess you would just have to transfer it to a personal loan like Mucky_Tiger said.

Hi Monikah

You need to get good lawyer and it depends on your bank. If you know for sure that your mortgage will exceed the selling price then generally we advise people to go to the bank explain the situation and see if you can get approval for a personal loan for the shortfall of the loan prior to entering into any agreement to sell the property - if this is not an option or unsuccessful and it is evident that its either sell now or otherwise head towards mortgagee sale if an offer comes in get it sent to your lawyer prior to you signing and have a clause inserted that the agreement is conditional for about a week on you obtaining banks consent to the sale then your lawyer needs to negotiate with the bank to basically accept the net sale proceeds from the sale as full satisfaction of the mortgage. I advise people not to warn the agent of the issue until after an offer has been presented unless the agent is already well aware of your situation.

If you don't get the banks agreement first it can be a nightmare on settlement where basically the bank will refuse to discharge the mortgage so you will be liable to the purchaser for not being able to settle and on top of this the agent is still entitled to their commission. I have had this happen to client luckily for him after about a week afer settlement was due we managed to negotiate something with the bank and complete settlement with his purchaser - all of which could have been avoided if he had told us right from the beginning of his situation.


Now for the disclaimer.... this is just general advice on the onfo provided and should not be relied on please see your lawyer for legal advice.

Also this is just a quick summary of how it can be dealt with there could be other options available and like I have said it will depend on the amount of the shortfall, your bank and the negotiating ability of your lawyer as to whether the bank will agree to releasing their discharge of mortgage without payment of the mortgage in full.

I have the same problem at the moment (well similar - my ex is refusing to pay his share of the mortgage and I need to sell the house but its worth less than the mortgage). I went and talked to the bank and they have pretty much pre approved me for a personal loan for $40k so that if the house sold and there was debt left over then it would be converted to a personal loan up to that amount. If I get an offer I need to take it to them and ask if they will approve the sale basically.The bank have advised me that if I had an offer that meant the debt would be higher than $40k then they will not approve the sale of the house. My bank manager told me that my only way around that was to default on the payments and force them in to mortgagee sale.

One of the problems with this is that the personal loan is at an interest rate of 16.5% and over quite a short term (10 years I think they said) so the payments are quite high.

I have heard some banks are a bit more flexible than mine so you probably should talk to them and find out what the options are before you make any decisions. I spent weeks talking various scenerios through with the bank and they were very helpful even if I didn't get the answers I wanted. I think they prefer people to talk to them about this stuff first before any decisions are made.

Oh, and as for fees from real estate companies?

Usually around 4% for the first $300,000, and 2% for anything thereafter. So, if your house sold for $395,000, you would pay 4% on the first $300,000, and 2% on $95,000. Plus $500 for administration (most companies give you $500 worth of free advertising to start with so that's where that fee comes in).

DO ask your Sales Consultant for a marketing package quote. For example, you might pay an additional $650 for a hard-out marketing hit for the first month or so. This is really really important and should always be considered, because the marketing must be ferocious in the first 3 weeks due to that being the time-frame of strong interest in a newly listed property (this is statistically proven). So if you can hard-hit that advertising with big colourful advertising in The Blue Book, The Realtor, The Property Press, local newspapers, then your property will stand out.

The other thought I have for you because you are wanting to sell in a hurry, is Auction. Auction creates urgency amongst buyers and a property CAN sell prior. This gives you a final date, the purchaser gets a 'start date', and you can all move on. IF for some reason your property doesn't sell at Auction, statistically they do sell soon after.

Auctions incur extra fees to cover the Auctioneer and the vigorous marketing - because the marketing is short-lived and has to attract that audience you desperately need to sell the property - so bear that in mind as well

A good real estate consultant should certainly talk you through all of these options. Make sure your agent is not over-booked with properties for sale, and don't be afraid to ask for their portfolio or references either. Remember, they work for YOU so make sure you are getting the right person for the job. If they don't feel right, don't sign up with them, there are many others to pick from, and as the market is a little bit slow at the moment I can guarantee that a good consultant will work their butts off for you - they only get paid when your property sells!

Absolutely correct minxynzl - and do bear in mind that a real estate consultant will likely price it a bit higher than your MV (I know it as RV - 'registered valuation' - I had to think what MV was for a minute! - 'market valuation' I assume). An MV/RV will cost YOU as the property owner (from memory around $300-$600).

Approx 18 months ago we had a property that got an RV of $385,000 and we sold it for $350,000... like minxynzl says, the market will dictate your property's worth, not the RV/MV or the sales consultant. They are only mere indications in these times unfortunately.

Edited by MaeBeeBaby