Selling a house in California is already a big decision—but selling when you still owe the bank? That can feel overwhelming, especially if the payments are tight, you’re behind, or the home needs repairs.
The good news:
Most California homeowners sell their house before the mortgage is paid off. It’s normal. And whether your goal is to avoid foreclosure, downsize, cash out equity, or move quickly, you absolutely can sell with an existing loan.
This 2025 guide breaks down exactly how to sell your home when you still owe the bank, what to expect, how payoff works, and the fastest options if you’re in a tough spot.
Can You Sell a House You Still Owe Money On? (Short Answer: Yes)
You don’t need to own your home “free and clear” to sell it.
In fact, according to national real estate transaction data, over 63% of all home sellers still have a mortgage balance at the time of sale.
California is no exception.
When you sell:
✔️ The buyer brings the money
✔️ Escrow uses that money to pay off your mortgage
✔️ Any leftover funds (your equity) go to you
So yes, it’s completely normal.
Where it becomes tricky is when:
• You owe more than the home is worth
• You’re behind on payments
• The home needs major repairs
• There are multiple loans or liens
• There’s active foreclosure activity
But each situation has solutions—many of which we’ll break down below.
How Mortgage Payoff Works When You Sell
When you accept an offer and open escrow, your mortgage lender sends something called a mortgage payoff statement.
This includes:
• Remaining principal balance
• Daily interest
• Late fees (if applicable)
• Prepayment penalties (rare in California)
• Escrow fees owed to the lender (optional depending on the loan)
Example:
A seller in Norwalk we helped—Sandra—still owed $347,000 on her mortgage. Her sale price was $535,000. After paying off her loan and closing costs, she walked away with $161K in cash, even though she originally thought she couldn’t sell because she’s “still paying off the bank.”
Key Point:
Your mortgage doesn’t slow down or complicate the sale. It’s simply paid off at closing.
What If You’re Behind on Payments? Can You Still Sell?
Yes. You can sell even if you are behind—and sometimes that’s the best way to stop the situation from getting worse.
When you’re behind:
✔️ Your payoff will include missed payments
✔️ It will also include late fees
✔️ Escrow simply pays everything from the buyer’s funds
Real Example:
In Palmdale, Eric was behind by 5 months, owing nearly $19,000 in arrears. His home still had equity, so selling fast allowed him to avoid foreclosure and walk away with $42,300 after payoff.
Selling before foreclosure hits gives you:
• More control
• A cleaner credit report
• Better long-term financial stability
If you’re behind and need quick clarity, you can also use California’s foreclosure rules here:
California’s Homeowner Bill of Rights
What If You Owe More Than Your House Is Worth?
If you owe more on your mortgage than the home will sell for, this is called being underwater or negative equity.
Your options are:
Option 1: A Short Sale (If Approved by Your Lender)
A short sale is where your lender agrees to accept less than what’s owed.
California has protections through the Mortgage Forgiveness Debt Relief Act
Short sales take time—often 3–6 months—because the bank must approve.
But they can prevent a full foreclosure.
Option 2: Loan Modification
If the goal is to stay in the home, not sell immediately, loan modification may be better.
Option 3: Sell to an Investor Who Can Help Cover Fees
Sometimes a cash buyer can structure a deal where:
• They pay your closing costs
• They negotiate your arrears
• They help work with the bank before the sale
Calculating Your Equity Before You Sell
It’s important to know your numbers ahead of time.
Calculate estimated equity:
Current market value
– Mortgage payoff
– Estimated closing costs (5–8%)
= Your equity
Example:
Value: $700,000
Payoff: $412,000
Closing costs: $40,000
Estimated equity: $248,000
You can get a FREE payoff amount from your lender anytime—it does not hurt your credit.
What Happens If Your Home Is Going Into Foreclosure?
If you’ve received a:
• Notice of Default (NOD) or
• Notice of Trustee Sale (NOTS)
—you still have the legal right to sell.
Here’s the foreclosure timeline in California.
Most homeowners don’t realize:
Up until 5 days before the auction, you can still choose to sell.
And selling can:
✔️ Stop the foreclosure
✔️ Prevent long-term credit damage
✔️ Protect equity
✔️ Put money back in your pocket
We once helped a homeowner in Lancaster who had 13 days before auction. We closed fast, paid off the bank, and he left with enough money to relocate and start over.
How to Sell Your House When You Still Owe the Bank (Step-by-Step)
Step 1: Request Your Payoff Statement
Call your lender or download it through your online portal.
It will show the exact dollar amount required to close.
Step 2: Get Your Home’s Market Value
Look at comps, ask an agent, or get a quick investor offer.
Step 3: Decide Your Selling Strategy
You have 3 main paths:
1. Traditional Listing (Best if the Home Is in Good Condition)
Pros:
• Highest possible price
• More buyers
Cons:
• Repairs, showings, inspections
• 45–75+ day timelines
2. Sell As-Is on the Open Market
Many sellers choose this when they:
• Don’t want repairs
• Need a simpler sale
• Don’t want to wait
3. Sell to a Cash Investor (Fastest Option)
Perfect for:
• Behind on payments
• Foreclosure
• Properties needing work
• Homes with code violations
• Inherited houses
• Tired landlords
• Underwater properties
• Situations needing a quick close
Cash buyers can:
✔ Close in 7–14 days
✔ Cover closing costs
✔ Buy homes as-is
✔ Work with your timeline
✔ Help stop foreclosure depending on auction date
Selling As-Is When You Still Owe the Bank
Many homeowners choose to sell as-is because repairs can be expensive.
A 2024 California contractor study found that:
• Roof replacements average $12,000–$34,000
• Kitchen renovations average $41,000–$68,000
• Plumbing re-pipes average $8,000–$20,000
If you don’t want to pour money into a house you’re already trying to exit, selling as-is can be a relief.
Can You Sell Your House if You Have Multiple Mortgages or Liens?
Yes—you can sell even with:
• 2nd mortgages
• HELOCs
• IRS liens
• Judgment liens
• HOA liens
• City fines
• Code violations
• Child support liens
All must be addressed at closing, but they don’t block the sale.
We once helped a homeowner in San Pedro who had:
• A primary mortgage
• A HELOC
• A $6,300 city nuisance lien
• And $3,100 in unpaid HOA dues
Even with all of that, he sold and walked away with $18K in proceeds.
Selling When You Have Little or No Equity
Here are strategies if you’re low on equity:
1. Ask the Buyer to Cover Closing Costs
Some buyers—especially investors—will.
2. Negotiate Commission With Your Agent
Many agents will work with you if they understand the situation.
3. Explore a Cash Buyer Who Can Structure Fees Differently
Investors may have more flexibility.
Pros & Cons of Selling When You Still Owe the Bank
Pros
• You can sell anytime
• You don’t need a paid-off home
• You keep equity
• You stop foreclosure risk
• You relieve financial stress
• You move on your timeline
Cons
• If underwater, sale options are limited
• If behind, payoff may be higher
• Appraisal issues may complicate agent-listed sales
• HOA or tax liens increase payoff
How Mrs. Property Solutions Helps Homeowners Who Still Owe the Bank
At the end of the day, our role is simple:
✨ We provide options. Not pressure.
✨ We help California homeowners in tough spots every day.
✨ We buy houses as-is—even if you still owe the bank.
Ways we can help:
• Free payoff review
• No-obligation cash offer
• Flexible closing timeline
• Help understanding your foreclosure timeline
• No repairs, cleaning, or showings
• We pay closing costs
• We can close in as little as 7 days
If you’re in a stressful situation—behind on payments, facing foreclosure, juggling debt, or dealing with a home that needs work—we’re here to help.
You can reach us anytime for a fair cash offer or simply to ask questions.