Selling a home when you owe more than it’s worth

Should you short sale your home?
If you owe more on your home than it is worth, you should consider various options.

Everyone buys a home with the intention to build equity. Unfortunately, sometimes unexpected life experiences and expenses occur and homeowners end up owing more on their mortgage than their home is worth. This typically occurs when financial setbacks require the homeowner to borrow money against the home. Of course, in the event that home prices go down, this can leave the homeowner with a mortgage balance that is greater than the value of the home as well. Whatever the reason, this is a potential outcome and should be analyzed carefully.

Should you sell your home?

In general, selling your home with an underwater mortgage is not a good idea. If you do not have an urgent need to move out of the house, it is always advisable to continue making your payments until you bring your equity into positive territory. If possible, additional mortgage payments will significantly decrease the time it takes to do this. In addition, this may give the housing market some time to improve thus leading to some home value appreciation as well.

In the event that you need to relocate soon, there are several options to consider:

  • Sell your house & pay the difference to your lender: Although this option may be the least practical, doing this is the only way to not negatively impact your credit. Of course, this option may require draining your retirement savings or even taking out a personal loan.
  • Short sale: This option requires that you sell your property for less than it is worth. The short sale may or may not be approved by your lender. Regardless, you can expect this option to certainly damage your credit although not as significantly as a foreclosure. Depending on the state where you live, the lender may or may not have to forgive the difference between the loan balance and the sale price.
  • Foreclosure: This option is typically viewed as the last result. Needless to say, a foreclosure will devastate your credit and will likely take several years to recover from. In addition, you will likely not be able to qualify for another mortgage for a significant period of time as well. One option is to have your lender agree to a deed in lieu of foreclosure. Although this option will still damage your credit, you may be able to negotiate somewhat favorable terms with the lender.


As always, it is highly recommended that you have a strong real estate team on your side. At minimum, this team should include a local & knowledgeable real estate agent, mortgage broker, & a real estate attorney. Knowledge and preparation is key to success in any circumstances and navigating a situation where you may owe more than your home is worth can be quite tricky.

At Live South Florida Realty, Inc. we have assisted many clients with their real estate needs. Are you looking to buy or sell a property in South Florida? Now more than ever, it is critical to have a qualified real estate team and the proper search tools behind you. Live South Florida Realty, Inc., has been a leader in the South Florida market for many years. Let our team of professionals assist you with buying or selling your piece of paradise today! In addition, our recently launched “Florida Home Search” app is now available on the Apple App Store and Google Play Store. With real-time MLS feeds, this app lets you set your own alerts to notify you as soon as a property meeting your needs hits the market. Furthermore, it will also let you know of recent closed sales in your area so that you may be even more educated on the market. Be sure to download this app for your smartphone or tablet today!

By natasha moore

REALTOR® with Live South Florida Realty, Inc.

Leave a comment

Your email address will not be published. Required fields are marked *