Selling a property at a loss can be a difficult decision to go ahead with and can put home owners in an awkward position; wondering whether it’s the right decision to make.
If you find yourself in this situation the best option would be to hold out until market conditions improve. Taking a lower offer could be a decision that you later regret. In any market, sellers are looking to make a profit; however, sometimes circumstances dictate the need to do otherwise. If you are having financial difficulty and can’t keep up mortgage payments, or need to relocate for your job, then selling at a loss may be a decision that is necessary and out of your control. If you don’t have the ability to hold out for a better time, there are some things to consider, read on to find out the implications of selling your house at a loss.
Is There a Mortgage On The Property?
If there is no mortgage remaining on the property when you sell it for a loss, and the full sale amount is yours entirely, you would not be liable to pay any Capital Gains Tax (CGT) on the transaction. However, According to Nolo, if this property was your main residence for personal use, this loss would be considered a non-deductible personal expense. Meaning there are no tax benefits to selling your main residence at a loss. You can only deduct losses on the sale of a property used for business or investment purposes.
If there is a mortgage remaining on the property, the main thing to consider would be the selling price, would it cover the cost of the remaining debt, and what the implications would be if it does not. Mortgage lenders will seek to get their full amount from their lenders, but in some cases, it can also be in their interest to salvage what value is remaining to cover their original investment. A ‘short sale’ is when a mortgage lender agrees and allows a lender to sell their home for less than the total amount of debt against the property, avoiding foreclosures and repossessions. The Mortgage lender would have the final say on whether the price can be accepted for the property, approval from them would be needed every step of the way, which can slow down the whole process of selling. Every mortgage lender has different terms and conditions, to check if you are able to perform a short sale contact your mortgage provider.
As previously mentioned, tax implications are different for properties that are for business or investment purposes. If a landlord sold a rental property at a loss, he would not be liable to pay CGT; however, he would be able to offset his losses against future profits for tax purposes. This means they would receive tax benefits from the sale of their property.
This is quite a brief overview of what to think about when selling a home at a loss and only covers a few scenarios that you could be presented with. There are other things that will need thought and consideration, to find out more about how we can help then visit our website at https://fastcash4houses.co.uk/ or get in contact with us to speak to a member of our team directly on 01204 294356 or [email protected]. At FastCash4Houses, we want to support you every step of the way, so don’t hesitate to contact us for some clarification on any questions you may have.
