How to Escape a Home That You Can't Afford

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The housing market may have recovered ( for the most part) since its disastrous crash in 2007, but in some markets, home values still haven't regained their losses. If you bought at the wrong time or in the wrong place -- or even just suffered a personal financial downturn -- you might find yourself underwater and overwhelmed by the fees that come standard alongside a home sale.

So are you stuck with this home forever?

Luckily, the answer is usually an emphatic no: Every home has an escape hatch -- several of them, actually. Yes, you may take a financial hit in the process. Only you can decide if sticking it out is a better option than going through the transitory stress of putting it on the market. Still itching to ditch? Here are your options.

1. Call a Realtor

Got a sneaking suspicion your home's not worth much? Worried about the fees piling up at closing? If you're not sure where your stand, getting in touch with a Realtor (or two) is the first step, says MaryAlice Beevore, a Minneapolis agent.

"Sometimes people are pleasantly surprised their homes are worth more than they think they are," she says.

Realtors may be surprisingly flexible, especially regarding the standard 6% listing commission.

"That commission is a sacred cow," says Beevore. "But now, many of us don't have the same amount of overhead." And that can be good news for you in negotiating the fee.

2. Rent it out

Finding renters might seem like a headache, but consider this: With the assistance of a reputable property management company, you can get your home into rental shape and score some amazing habitants who'll put care into its maintenance (and money, via rent, toward your mortgage). You can get tax breaks, too.

"Renting it out isn't a bad option," says Beevore. Not only does it provide a direct stream of income, it also offers tax breaks that can go a long way toward helping you regain equity in your property.

"It might even be a financial advantage," adds Beevore. She recommends discussing your options with your tax professional. If you're really underwater -- and really, really desperate to leave -- renting it out might actually be your best option.

3. Consider a limited-service broker, with caution

If you've talked with a Realtor and still don't think you can swing the financial side of the sale, you might be thinking of trying to sell your home yourself. Another option is working with a limited-service broker (some of these brokers are Realtors, too). While you won't get the full-fledged brokerage experience, you will get your home on the multiple listing service, which is certainly better than just hanging a sign out front.

"If you just want to get your property on the MLS, a lot of brokerages will do that for a fairly low fee," Beevore says. "It gets you broad exposure to the market. But don't expect much service."

Before electing to use a limited-service broker, make sure you've fully evaluated your financial position. The added attention from a full-service broker can really help you sell your home more quickly, and for more money.

4. Finance it yourself

If you're struggling to find a buyer, you could consider offering a contract for deed, where you agree to finance the sale of your property. With this, you might get a little more money for your house -- but it comes with a bevy of risks.

With this, you're sacrificing the protections provided by a traditional bank loan. If your new buyers default, the mortgage (and the house) reverts to you. And since these situations tend to appeal to buyers who can't obtain conventional financing, the chance that they do default is a little higher.

But if you need to sell, this can help you find a buyer quickly and skip the mortgage-associated fees that banks typically charge. With a good buyer, you can come out ahead.

5. Beg the bank

If you're worried about foreclosure, you can talk to your bank about turning over the keys. This is called a deed in lieu of foreclosure, and it means walking away -- and likely losing a huge chunk of money in equity. But if you just want to wash your hands of the whole sorry situation and truly can't afford to sell, this may be your best option.

"The bank has to be willing to accept your offer," says Beevore. "A lot of times, they aren't." For banks, foreclosure often makes more sense, because they can continue to pursue the debt afterward. But some institutions offer a Cash for Keys program, in which they'll literally pay you to leave quickly -- if that's the case with your lender, it's worth investigating.

If you've already demonstrated that you can't pay the mortgage, the bank may be willing to negotiate. Note that this will have a negative effect on your credit score -- but it's not as severe as a foreclosure.

6. Fix it up

Don't go wild -- a full "add a half-bath!" renovation won't help you sell your home for more.

"The best things you can do to make your home attractive and more sellable are simple things," says Beevore. Adding new paint, replacing flooring, and hiring a stager can add value to your home without taking a huge chunk out of your pocket. That is, as long as you resist the urge to redo the whole home.

"For the most part, you don't get 100% of the money back you put into renovating your home," she says. So skip the chef's kitchen and major changes, unless you're hoping to persuade yourself to love your home.

7. Hold tight

Speaking of: Maybe you don't need to sell your home immediately. Can you live with its quirks for a little longer? While the market is a mystery, you can expect your home to appreciate 1% or 2% per year -- so if you're underwater by less than 10%, sitting still might be the best choice.

Beevore advises homeowners to "look at how far underwater you are. If it's only 5 or 8%, you might just want to wait it out," she says. "You'll get there."

If you're getting into the double digits, "It's going to be a long wait," she says. In that case, you're better off trying to sell or rent it out.

No matter what, don't panic: If you want out of a home, there's always a way that won't leave you hanging.