Feb 4, 2025
Homeownership can come with many benefits, like escaping high rents and the chance to achieve a bit more stability.
Owning your own place could give you the space and freedom you want to renovate the home as you wish. It can also be an opportunity to build equity and, hopefully, see the property appreciate in value.
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But what if it doesn’t work out the way you expect?
While your property itself could be fine, you may be living among neighbors you don’t care for, with higher costs, like property taxes and even higher homeowners association (HOA) fees.
Yes, you can escape the rising costs by selling. But, you need to face the fact that you could be selling at a loss.
When to sell your house at a loss
Whether you face a loss in the tens of thousands of dollars or much less than that, you need to consider whether it’s in your best interest to stay or sell. Here’s how you can work through your decision.
Financial struggles can be a valid reason to sell your house at a loss. Maybe you’ve had a job loss or your income has changed and now you’re struggling to make ends meet. Having a mortgage payment on top of all your other expenses might be too much to budget for.
If you’re already behind on payments and you aren’t sure if you’ll be able to catch up, selling at a loss could be better than facing possible foreclosure — the biggest risk of which is rising hidden homeownership costs, according to a national survey by Auction.com in 2024.
Going through big life events, such as a move or a divorce, could also mean selling your home — even at a loss — makes the most sense.
Say, you work in a sector — the military, for example — where your employer has a say in where you live. If you get orders to pack up and relocate, it may not make sense to keep your home. Especially if you need the equity tied up in the home to purchase another one.
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Those among the 40% or more of Americans who get divorced may have no choice but to sell their home, even at a loss. You or your former spouse could buy the other out, but it’s possible that’s out of reach financially.
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Alternative solutions
You may not need to sell at a loss if you're still able to manage the payments or get creative with solutions to your homeownership woes.
For one, consider reaching out to your mortgage lender as soon as you feel you’re going to struggle with payments. There may be options, including lowering the amount or frequency of your payments. Your lender could also work with you to negotiate a loan modification, or a change in your loan terms. They could include a reduced interest rate, an extension on your repayment period or reducing your principal balance.
You could also look into refinancing your current loan for a lower interest rate or to extend your loan repayment term. Either one of these could mean lower monthly payments, giving you much-needed room in your budget.
Of course, refinancing your mortgage typically comes with fees, so do some calculations to see whether it’s worth it. If you’re looking at other lenders, be sure to shop around to find the best rates and terms based on your credit profile.
Holding onto your home until real estate prices recover is also an option, if you can find a way to bring in extra money. Perhaps you can take on a part-time job or rent out a room in your home to boost your income.
Even if none of these options work for you, selling your home at a loss doesn’t have to feel like the end of the world. After all, you could be saying goodbye to a stressful situation, and that in and of itself could be worth it.
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Sarah Li-Cain, AFC is a finance and small business writer with over a decade of experience.
