How do I know if I am underwater?

Take a written payoff figure from every lender, add association arrears and anything else recorded against the property, then subtract that from a realistic sale price less selling costs. A surprising number of owners who assume they are underwater are not.

Can I sell if I owe more than the house is worth?

Yes, either by bringing the shortfall in cash at closing or through a short sale where the lender agrees to accept less. Which route applies depends entirely on the size of the gap.

Is it better to rent it out instead?

It can be, particularly if you do not have to move and the rent covers the obligation. It makes you a landlord with the obligations and the different tax treatment that carries, so it is a real decision rather than an easy default.

Will the lender let me pay the shortfall over time?

Some will, through an unsecured note after closing rather than cash on the day. It is worth asking directly, because it is not usually volunteered and it can make an otherwise impossible sale straightforward.

Do selling costs really make that much difference?

Yes. Commission, documentary stamp tax on the deed, title and settlement charges and any concession together consume several percent of the price, which is why a property bought recently can be underwater even when the value has not fallen.

Should I stop paying to qualify for a short sale?

No. It damages your credit, adds fees and arrears to what is owed, and does not guarantee the outcome you were promised. Lenders assess hardship on documentation rather than on missed payments alone.

Can someone take over my payments?

Be extremely careful. Handing over the deed while the loan stays in your name means giving away the property and keeping the debt, and it is a common feature of arrangements that target owners in difficulty.

What if a special assessment caused this?

That is one of the more recoverable cases, particularly in a building completing structural work and funding reserves. Buildings that finish the work and restore their financeability usually recover much of what the uncertainty cost.

Does paying extra principal help?

It reduces the gap directly and it is the part of the equation you control. Whether it is the best use of the money depends on your wider position, so it is worth modeling rather than assuming.

Can I rent it out if I have a residential mortgage?

Check your loan documents and your association rules, because both may restrict it and both have remedies. Discovering a breach part way through a tenancy is worse than the original problem.

What if I need to move for work?

That is a documented hardship for short sale purposes and it also opens the renting option. Establish the numbers first, because a property that covers its costs as a rental turns a forced sale into a choice.

Selling when you owe more than the house is worth

Selling a house that is underwater means the loans against it exceed what it will sell for, so the closing cannot pay everyone from the proceeds. That is a solvable problem more often than owners expect, and the first step is always the same: work out the actual gap, because it is frequently smaller or larger than the rough arithmetic suggested.

Free Home Valuation

Every situation on this page comes down to a number: what the property is worth and what you would net. We will work both out from recent sales near you, at no cost.

Work out the real number

Start with a payoff figure from every lender, not the balance on a statement. A payoff includes interest to a date and any fees, and it is generally the larger number.

Add any second mortgage or line of credit, which owners sometimes forget because the balance is small and the payment is automatic.

Add association arrears, judgments, tax obligations and anything else recorded against the property, all of which have to be cleared to transfer clean title.

On the other side, take a realistic sale price from recent comparable sales rather than from an online estimate.

Subtract selling costs from that price: commission, documentary stamp tax on the deed, title and settlement charges, and any concession you expect to make.

What remains is the gap. It is the only number that matters, and a surprising share of owners who believe they are underwater turn out not to be once it is calculated properly.

If the gap is small

Bringing cash to closing is the simplest resolution, and where the amount is modest it is generally cheaper than the alternatives once you count the time.

It avoids the credit consequence, avoids lender approval entirely, and lets the sale behave like any other, which widens the buyer pool considerably.

Some lenders will allow the shortfall to be repaid over time through an unsecured note rather than in cash at closing, which is worth asking about directly.

Reducing the gap is also an option: modest repairs and presentation frequently return more than they cost, and a property that shows well sells closer to the top of its range.

Negotiating the selling costs helps at the margins, and where the market allows it, so does declining to offer concessions.

The practical test is whether the gap is closeable with money you can access without creating a worse problem elsewhere.

If the gap is large

A short sale becomes the route, which needs the lender to accept less than they are owed and release the lien anyway.

That is slower, less certain and dependent on a documented hardship, so it suits an owner who must sell rather than one who would prefer to.

Renting the property is the main alternative for an owner who does not have to move, and in much of South Florida rents will cover a mortgage taken out at a lower price.

That turns the decision into a holding position: keep the property, cover the payment, and revisit when values or the balance have moved.

It also turns you into a landlord, with the obligations that carries and with the tax treatment of a rental rather than a residence, which matters more than people expect.

A loan modification is worth asking about where the payment rather than the balance is the problem, since it addresses affordability without a sale.

Why properties end up underwater here

Buying near a peak and needing to sell early is the classic case, since selling costs alone consume several percent of the price.

Borrowing against the property afterwards, whether for renovation or otherwise, raises the balance without necessarily raising the value by as much.

Rising carrying costs can make a property unaffordable even where the balance is fine, and in Florida insurance increases have done exactly that to owners who were comfortable a few years earlier.

In condos, a special assessment can reduce what a unit sells for by more than the assessment itself, because buyers discount for the uncertainty as well as the cost.

A building with weak reserves or an unfinished structural inspection can lose its financeability, which removes every buyer who needs a mortgage and takes the price down with it.

That last case is the one most likely to resolve on its own, since a building that completes its work and funds its reserves usually recovers what it lost.

What not to do

Do not stop paying in order to qualify for help. It damages your credit, adds fees and arrears to the payoff, and may not achieve what you were told it would.

Do not sign the deed over to anyone offering to take over payments. The loan stays in your name and you have given away the property and kept the debt.

Do not rent it out quietly in breach of your loan or your association's rules, since both have remedies and discovering them mid-sale is worse than the original problem.

Do not price the listing at what you owe. Buyers price on the market and a property priced at the seller's arithmetic simply sits.

Do not wait for the market without deciding how long you are prepared to wait, because an indefinite wait is a decision made by default.

Do get the numbers properly and take one hour of advice. Almost everything expensive in this situation follows from acting on a rough estimate.

Getting a straight answer quickly

Ask each lender for a written payoff good through a specific date.

Ask any association for an estoppel or at least a statement of what is outstanding.

Get a valuation built from recent nearby sales, and ask to see the sales rather than only the number.

Ask an agent for a net sheet showing the proceeds after all costs at two or three different prices, which turns an abstract worry into a range.

Take the result to an accountant if forgiven debt is in play, and to a lawyer if any lender has begun a legal process.

The whole exercise takes about a week and it converts an open-ended problem into a decision with a small number of options, most of which are better than they felt beforehand.

Deciding how long to wait

For an owner who does not have to sell, waiting is a legitimate strategy and the question is what would have to change and by when.

Two things reduce the gap over time: the balance falls as you pay down principal, and the value may rise. Only the first is within your control.

Set a review date rather than waiting indefinitely, because an open-ended wait is a decision nobody consciously made.

Work out what the property would need to be worth to clear, then judge whether that is a plausible move in the period you are prepared to wait.

Count the carrying cost of waiting: the payments, the taxes, the insurance and the maintenance you will fund in the meantime.

Where a condo assessment or a building's inspection status caused the gap, the review date should track that work rather than the market, since finishing it is what restores the value.

This page explains how the market and the process handle this situation. It is not legal, tax or financial advice, and several of the questions here have real legal answers that depend on facts a web page cannot see. For anything involving a lender's legal process, a trust or an estate, speak to a Florida attorney. For anything about tax, speak to an accountant. We are glad to introduce you to either, and a valuation costs you nothing in the meantime.

Frequently Asked Questions

How do I know if I am underwater?: Take a written payoff figure from every lender, add association arrears and anything else recorded against the property, then subtract that from a realistic sale price less selling costs. A surprising number of owners who assume they are underwater are not.
Can I sell if I owe more than the house is worth?: Yes, either by bringing the shortfall in cash at closing or through a short sale where the lender agrees to accept less. Which route applies depends entirely on the size of the gap.
Is it better to rent it out instead?: It can be, particularly if you do not have to move and the rent covers the obligation. It makes you a landlord with the obligations and the different tax treatment that carries, so it is a real decision rather than an easy default.
Will the lender let me pay the shortfall over time?: Some will, through an unsecured note after closing rather than cash on the day. It is worth asking directly, because it is not usually volunteered and it can make an otherwise impossible sale straightforward.
Do selling costs really make that much difference?: Yes. Commission, documentary stamp tax on the deed, title and settlement charges and any concession together consume several percent of the price, which is why a property bought recently can be underwater even when the value has not fallen.
Should I stop paying to qualify for a short sale?: No. It damages your credit, adds fees and arrears to what is owed, and does not guarantee the outcome you were promised. Lenders assess hardship on documentation rather than on missed payments alone.
Can someone take over my payments?: Be extremely careful. Handing over the deed while the loan stays in your name means giving away the property and keeping the debt, and it is a common feature of arrangements that target owners in difficulty.
What if a special assessment caused this?: That is one of the more recoverable cases, particularly in a building completing structural work and funding reserves. Buildings that finish the work and restore their financeability usually recover much of what the uncertainty cost.
Does paying extra principal help?: It reduces the gap directly and it is the part of the equation you control. Whether it is the best use of the money depends on your wider position, so it is worth modeling rather than assuming.
Can I rent it out if I have a residential mortgage?: Check your loan documents and your association rules, because both may restrict it and both have remedies. Discovering a breach part way through a tenancy is worse than the original problem.
What if I need to move for work?: That is a documented hardship for short sale purposes and it also opens the renting option. Establish the numbers first, because a property that covers its costs as a rental turns a forced sale into a choice.

Related Situations

Short sales in Florida, and when they make sense

A short sale in Florida needs the lender to accept less than they are owed. What the process involves, how long it takes, and the term that matters most.

Selling a house in foreclosure

Selling a house in foreclosure is usually possible and usually better than letting it complete. What the timeline allows, and who to talk to first.

Selling a condo in Florida

Selling a condo in Florida now turns on the building as much as the unit. Reserves, milestone inspections and financeability decide the buyer pool.

Work out your numbers

What is my home worth?

A valuation built from closed sales in your own community, with the comparables named.

Estimate your net proceeds

Work the commission, documentary stamps and closing costs against your own number.

Current market reports

Prices, days on market and inventory for the counties we cover, updated monthly.

How we list a home

What we do between the listing agreement and the closing table, phase by phase.

Talk It Through

Tell us the situation and we will tell you what it is worth

Most of what makes a sale complicated is solvable once somebody has looked at the actual numbers. Onias Derilus is a licensed Florida broker and there is no cost to a conversation, whether you list this month or next year.

Get My Home Value Buying Too? Start Here

Keep Reading