Francois Delille

Cozy Homes
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Underwater in both house and mortgage

September 23rd, 2017

Are both your house and mortgage underwater?

The extreme flooding of Harvey has left many homeowners with a ‘double punch’ effect: they are underwater in both their houses and their mortgage.

As an example, a homeowner with a house with a pre-flood value of 180k and a mortgage balance of 150k. After the flood, the whole neighborhood gets stigmatized and the house value is now reduced to 150k after repair. The homeowners has 30k in repairs. If he fixes it himself, he will have spent 180k on a house that is worth only 150k which puts him in the red for 30k on this property.

Not a great perspective, but is there an option for this homeowner to come out even in this situation?

The answer is yes and it comes as a ‘short sale’. A ‘short sale’ is a sale in which the bank accepts a payoff that is less than what is owed on the house. We expect a resurgence in short sales as bank will not want to foreclose on flooded houses and certainly do not want to handle the repairs themselves.

Hence, the short sale is a way for them to make sure they don’t end up with a flooded asset and everybody wins:
1) the homeowner comes out even (does not make money but more importantly does not loose any)
2) the bank accepts a loss but gets to move on without having a bad collateral on their book
3) The buyer, likely an investor, will take care of all the repairs and hope for a long term recovery.

If you think a short sale is the right solution for you, contact us at or 713-397-8857.

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Disclaimer : The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official policy or position of the Houston Association of REALTORS®

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