What happens when you’re ready to sell your house, but the mortgage balance is higher than what someone is willing to pay for it?
It’s a situation that can leave homeowners feeling stuck. You may want to move, downsize, or get out from under a property that needs repairs, but selling doesn’t seem as simple as putting a sign in the yard.
Here in New Orleans, we’ve bought and renovated houses in just about every condition imaginable. We’ve also seen how unexpected repairs, financial changes, and mortgage problems can make owning a house more stressful than it should be.
If you owe more than your house is worth, you still have options. The important thing is understanding what those options are before making a decision.
What Does It Mean When You Owe More Than Your House Is Worth?
This is commonly called being underwater on your mortgage or having negative equity.
Let’s say you own a house in New Orleans with the following numbers:
· Remaining mortgage balance: $250,000
· Estimated property value: $210,000
· Difference: $40,000
In this example, you owe $40,000 more than the house is worth.
And remember, that doesn’t include possible selling expenses, unpaid property taxes, or other costs that may need to be settled at closing.
If you sold the house for $210,000, the sale proceeds alone wouldn’t cover your entire mortgage.
That’s where the problem comes in.
How Does This Happen to New Orleans Homeowners?
There isn’t just one reason a homeowner ends up owing more than their house is worth.
Sometimes it’s because the property was purchased when prices were higher. Other times, it’s because the homeowner refinanced, borrowed against the property, or hasn’t had enough time to build equity.
Property condition can also make a big difference.
In New Orleans, we regularly come across houses with foundation issues, roof problems, outdated plumbing, termite damage, or years of deferred maintenance.
A house in Gentilly, Mid City, Hollygrove, or Uptown might have plenty of potential, but the repairs needed to make it market-ready can affect what buyers are willing to pay.
And if the owner doesn’t have the money to make those repairs, selling becomes another challenge.
Can You Sell a House If You Still Owe Too Much?
Yes, but the mortgage must be dealt with as part of the sale.
Normally, when someone sells a house, the closing company uses the proceeds to pay off the mortgage. Any money left over, after other expenses, goes to the seller.
But when the mortgage payoff is higher than the available proceeds, there isn’t enough money to pay the lender in full.
That doesn’t automatically prevent a sale, but it does mean you’ll need another arrangement.
Here are some possibilities.
Option 1: Bring Money to Closing
If you have enough available funds, you can cover the difference between the mortgage payoff and the net proceeds from the sale.
For example, if your total mortgage payoff is $250,000 but the sale leaves only $205,000 available to pay the loan, you would need approximately $45,000 from another source.
For homeowners who have savings or other resources, this might be possible.
For others, bringing that much money to closing simply isn’t realistic.
Option 2: Request a Short Sale
A short sale may be an option when you owe more than your property is worth and need to sell.
In a short sale, the mortgage lender agrees to consider a sale where the proceeds won’t cover the entire debt.
The lender reviews your financial situation, the property’s value, and the proposed purchase offer before deciding whether to approve it.
A few things are important to understand:
· Your lender must approve the short sale.
· Approval is not guaranteed.
· The process may take longer than a normal sale.
· You need to know whether any unpaid mortgage balance will be forgiven.
· There may be credit or tax consequences.
If you’re considering a short sale, ask for written confirmation of how the remaining debt will be handled. Speaking with a qualified attorney or financial professional is also a good idea.
Option 3: Stay in the House and Build Equity
Sometimes the best decision is not to sell right away.
If you’re current on your mortgage and can afford the payments, staying in the house may give you more time to pay down the loan.
That doesn’t guarantee your property value will increase, but it may improve your financial position over time.
Of course, this isn’t always practical.
If you’re relocating, going through a divorce, dealing with an inherited property, or facing expensive repairs, waiting several years may not be an option.
Option 4: Consider Selling Your House As-Is for Cash
One thing we’ve learned from buying houses throughout New Orleans is that not every homeowner wants to go through a traditional real estate sale.
Some houses need too much work. Others are filled with unwanted belongings, have code enforcement issues, or simply haven’t been updated in decades.
That’s where selling directly to a local cash home buyer may make sense.
At NOLA Buys Houses, we purchase houses in their current condition. You don’t have to spend money fixing the roof, updating the kitchen, or cleaning out the entire property before contacting us.
We can evaluate the house and make a no-obligation cash offer.
However, there’s one important detail: A cash offer doesn’t automatically solve negative equity.
If the mortgage payoff exceeds the purchase price, you’ll still need to cover the difference or obtain an arrangement approved by your lender.
We believe homeowners should understand that before moving forward.
Another option involves creative financing. There are offers we can present to you that will allow you to sell your house with negative equity without coming to the closing table with a big chunk of money. If this option is of interest to you call us and let us know. We can discuss your situation and see how we can help.
What If You’re Already Behind on Your Mortgage?
If you’re missing mortgage payments, don’t ignore letters or calls from your lender.
Falling behind can lead to additional fees and eventually foreclosure proceedings.
But being underwater doesn’t automatically mean you’re in foreclosure. The two situations are different.
Contact your mortgage servicer and ask about available assistance programs. Depending on your loan and circumstances, you may be able to explore a repayment plan, loan modification, or other options.
You can also speak with a HUD-approved housing counselor for independent guidance.
The sooner you look into your options, the better.
Should You Fix the House Before Trying to Sell?
This is another question worth asking.
Imagine owning an older New Orleans house that needs foundation work, a new roof, and major electrical repairs.
You could spend tens of thousands of dollars on improvements, but that doesn’t mean the property’s value will increase by the same amount.
Before investing in repairs, find out what the house may sell for as-is and compare that with the cost of fixing it.
If you’re already dealing with negative equity, spending more money without a clear plan could make your situation harder.
Need to Sell a House in New Orleans? Let’s Talk.
Owing more than your house is worth can be frustrating, but it doesn’t mean you should rush into the first solution you find.
Start by getting an accurate mortgage payoff, understanding your property’s current value, and talking with your lender if there’s a shortage.
At NOLA Buys Houses, we’ve spent more than 20 years working in the Greater New Orleans real estate market. We buy houses in any condition and help homeowners explore straightforward selling options without repairs, agent commissions, or unnecessary delays.
We cover our standard purchase closing costs and can work with you on a flexible closing date.
Have a house in New Orleans that you’re thinking about selling?
Call or text 504-264-1407, or visit www.nolabuyshouses.com to request a no-obligation cash offer.
We’ll be happy to take a look at the property, explain our process, and see whether selling directly to us makes sense for your situation.