What if I owe more on my mortgage than my house is worth?
Written and reviewed by Andrew Ragusa, Licensed Real Estate Broker and Broker of Record, REMI Realty LLC — 11+ years of transactions across Long Island, Brooklyn and Queens.
The short answer
If you owe more on your mortgage than your home is worth, it may be possible to sell through a short sale. Before I tell a homeowner what outcome to expect, I first need to communicate with the bank or loan servicer, determine what they require, and identify every mortgage or other lien that needs to be resolved. If there are second, third, or additional lienholders, each one may need to approve its part of the transaction before the sale can close.
The goal is to negotiate for the remaining debt to be forgiven or for the deficiency to be waived. That is what we are trying to accomplish, but it is not guaranteed. I would not tell a homeowner that the debt has been forgiven until the bank’s terms are in writing and the seller’s attorney has reviewed them.
I work in coordination with the attorney, often on the same email chain with the bank, so both of us receive the same information, ask questions, and work through the requirements together. What we tell the homeowner comes from what the bank and other lienholders actually agree to.