Selling a House When You Are Upside Down

Never done it, but many reports have it that mortgage holders generally refuse to allow the asset to be sold if they will not be totally paid off when the deal closes. The way I understand it you'll need to get a new loan for the excess, and pay at close. I hear also that buyers tend to want no part of this complication.

Bottom line, you need to talk to an expert, and your mortgage holder.

Re: Selling a House When You Are Upside Down


The house is your collateral with a mortgage. If the seller can't clear themselves of their mortgage no bank is going to give any possible buyer a new mortgage that they can't fully secure with the property. A part of the selling process is clearing the title - making sure that no one else has any claim to the property. And since the seller's mortgage is dependent on the property the seller's mortgage holder would retain a claim to the property. No clear title, no sale.

If I had a house that I owed $300,000 on and sold it for $250,000 I could go and try to get an unsecured loan to pay off the difference myself but mortgage lenders aren't in the business of giving unsecured loans and they aren't going to step into the middle of that.

There are people that have been upside-down on their mortgage that have sold their homes by making up the difference from their own savings. If you don't have much in savings though, you are pretty much stuck.

What fishin said and to add ....

The mortgage company actually owns your home in a sense, in these cases, the mortgage company owns more equity in the home than you do.

Have you every had a car loan? If so, you actually do not get the title of the car until you pay off the loan in full - the loan company retains title simliar to a mortgage.

There is still the matter of the buyers that I spoke of. The buying agent will know that you are upside down, and if it is not crystal clear how you are going to come up with enough cash to clear the tittle few buyers are going to be interested given the market.