Discharged 2013 - question about selling

[RNmomtofour]

So our bankruptcy closed in 2013. Our mortgage was discharged. We are still in the same home and have been paying our mortgage. We are thinking we want to sell soon. What happens when we sell? Do we get that equity? So confused on how this will work! Any help is appreciated.

[justbroke]

Were you in a Chapter 7 or a Chapter 13? If a Chapter 7, did you reaffirm the mortgage? The answer to those questions will matter. Since you say that the mortgage was discharged, this means you were in a Chapter 7 and did not redeem or reaffirm the mortgage.

In any event, you will get the equity.

[RNmomtofour]

I apologize - it was Chapter 7 and the mortgage was discharged and not reaffirmed. We have no clue what is needed or how we would even get a loan to buy a new house. We just really would like to move out of this neighborhood as it is declining. Amount still owed is $280,000 and we believe the house is worth around 290,000 or 300,000.

[justbroke]

There's nothing needed. You can sell it whenever you like. If you have that $280K balance, then you'll need to sell it for enough to pay the bank the $280K owed. It can get complicated if you do a short sale since most of the GSE (government-sponsored entities like Fannie Mae and Freddie Mac), along with FHA treat short sales the same as a foreclosure.

In other words, you need to sell it for enough that you can pay your commissions, seller taxes, and any other fees in order to sell.

Depending on your income and your DTI, you may be able to buy another home while you still own this one. That could be more difficult, but I had purchased 3 new homes within a short period of time because my income and DTI could support all three homes (alone with my reserves and sufficiently funded 401(k)).

If you figure that commission will cost you about 5% (maybe 6%) and the owner fees will cost another 1%, look at about 6-7% of the sale price in order to payoff the first mortgage. Using my handy-dandy calculator, that means you'll need to sell for $300,000.

Of course, this is just my estimate as I don't know the market, costs, or other factors for your home in your specific area.

[yeahknow]

Unless you REALLY need that $10K profit, I would think about renting the house out. Nice passive income and you problem have a great interest rate.