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Why Does the Payoff Include More?
Mortgage interest generally accrues between payments.
Depending on the loan and circumstances, the payoff may also account for items such as:
- Interest through the payoff date
- Authorized fees
- Delinquent amounts
- Servicer advances
- Other charges associated with the loan
The payoff should identify what is being demanded.
Your Escrow Account Is Another Source of Confusion
Sellers sometimes look at their mortgage account and see money in an escrow reserve account for taxes or insurance.
Then they assume:
"My payoff should be reduced by that exact amount."
Not necessarily.
How an escrow balance is handled depends on the servicer and transaction.
Do not mentally spend that money twice when calculating your expected proceeds.
What if You Made a Payment After the Payoff Was Ordered?
Tell escrow.
Payoff statements are calculated for particular dates and based on the account information available when issued.
A recent payment may require updated figures.
What if the Number Really Looks Wrong?
Ask for the payoff breakdown.
If you expected approximately $300,000 and receive $347,000, do not shrug and sign.
Compare:
- Principal
- Interest
- Fees
- Delinquencies
- Advances
- Payoff date
Then contact the servicer through verified contact information.
Why This Matters Before You List
Imagine you are selling because you need $80,000 from your equity for your next home.
A $15,000 unexpected payoff difference could materially change that plan.
That is why Lisa's seller strategy should focus on probable net proceeds, not simply:
"Your house is worth $600,000!"
A Local Seller Example
A Henderson homeowner purchased years ago and has significant appreciation.
The seller thinks:
Example
House value: $650,000
Loan: $400,000
"Therefore I have $250,000 coming to me."
No.
The actual seller net also needs to consider:
- Official payoff
- Any HELOC
- HOA obligations
- Seller closing expenses
- Commissions/compensation
- Negotiated buyer concessions
- Taxes/prorations
- Other title obligations
Sale price and spendable proceeds are very different numbers.
Before you make your next purchase dependent on sale proceeds, Lisa can help build a realistic seller-net picture, including enough margin for numbers that may change before closing.
