Part of today’s real estate climateThe idea of negative equity goes against every reason why we all buy homes in the first place. There’s no denying that it is part of today’s real estate climate.

House Selling Tips – New Orleans Real Estate – Kenner Home BuyersYour home was likely bought with the intention of making a good investment for your future. You probably paid a reasonable amount for it, but knew that over the years you’d be collecting equity as you got the mortgage paid down. In today’s real estate market, though, many homeowners are finding that their homes are upside down instead. This is especially true of those who have only owned their home for a few years and put very little or nothing down on the house to begin with.

Upside down, or negative equity, means that you owe more than your home is worth today. After building equity by paying off your mortgage from month to month, you find that your equity has slipped away as you have watched the home values drop lower and lower. To find the equity, either positive or negative, you must use the appraised current market value to determine the worth of the home officially, and then find out what you owe exactly on your mortgage.

Upside down, or negative equity, means that you owe more than your home is worth today

If you still owe $340k on your house but value has dropped in value to just $320k on today’s market, this leaves you upside down on the mortgage loan. No one in their right mind will agree to pay you what you need for the house, which would be the full $340k, but rather they might buy your house for $320k or a bit less. What do you do with the difference? At closing you might need to bring $20k for the mortgage lender to make up the difference. That doesn’t sound good to anybody.

Holding on to your house until the market improves and equity begins to increase once again is certainly an option. Some will be able to do this, while others don’t have a choice. You may need to get out of your house at this point and the negative equity will definitely affect your ability to leave the mortgage contract. Given the current market and financial climate, there are just a few options for you if this is similar to your situation.

You can consider approaching your lender to get permission for a short sale. With this permission you can find a buyer who pays less than what you owe and the bank will accept the short amount, usually forgiving the rest. Selling to a real estate investor quickly for cash is another option and there is no obligation for you to ask for an offer.

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