I've owned my home for close to 5 years and it's value is currently around $100k below my loan amount (according to zillow).

I hate living here, and I've wanted to sell it for a long time.

Today, out of no where, the previous owner came and knocked on my door saying he loves the place/neighborhood, and regrets selling it. He gave me his info and said to contact him if i ever consider selling it.

My question is...

What should i do? I'm not sure what kind of sale takes place when the property is worth less than the loan. What kind of professionals do i need to talk to besides a Realtor? Should i do a for sale by owner?

Any other information would be great. thank you!!

  • 7
    Talk to a local realtor or two to get a better indication of the value of the house? Feb 21, 2011 at 15:59
  • 6
    Don't go by Zillow - if you have an interested buyer talk to a realtor. Feb 9, 2015 at 0:22
  • @sevensevens Sadly - at least in my experience - Zillow seems to err on the side of overvaluing a property.
    – user12515
    Oct 23, 2019 at 23:54

6 Answers 6


I would tell the former owner that you will sell him the house for you current loan balance. He wants the home, he may be willing to pay what you owe.

You can't really do a short sale unless you are behind on your payments. Banks only agree to a short sale when they think they are going to have to foreclose on the property. Not to mention a short sale is almost as bad as a foreclosure and will wreck your credit.

If the former buying is not willing to buy the house for what you owe your only real option is to come up with the difference. If he offers you say $50K less than you owe, you will have to give the mortgage holder the remaining balance $50K in this example for them to release the property.

Another problem you will face, if the former owner is willing to pay more than what the house is worth, and he is going to finance it, he will have to have enough cash to put down so that the loan amount is not more than the property is worth.

Finally if none of that works you can just hold on to the property until the value comes up or you mortgage is payed down enough to make the balance of the mortgage less than the value of the house. Then offer the property to the former owner again.

  • 4
    Unless the mortgage is transferable, in which case you might be able to just transfer it back into his name, and leave it at that. May 19, 2011 at 22:19

I would not trust Zillow for an appraisal. The numbers I see on there vary a lot from real prices. I'm not sure I'd get a full appraisal either, as that means you "know" the value of the house and may be obliged to reveal it. I'd ask for the loan amount and see what the previous owner says.

  • 2
    Agreed, Zillow prices can be total junk. You need to find some comparable houses that have sold. As much as people have some good points about realtors being expensive and salespeople, they do have the necessary experience and info to do that. Comparables can be really tough if you haven't been inside the comparable houses; around here, moving just a couple blocks or the details of the house's interior can make 20-30% difference at least. That's part of why Zillow is so far off, since its info isn't detailed enough.
    – Havoc P
    May 6, 2011 at 2:12

How about doing a Lease Option with a very long term and a very early "option" for the guy buying. Essentially he will be making your mortgage payments for the next couple few years. Much less paperwork for the both of you that way.

See a lawyer for the paperwork, from my limited experience with a real estate lawyer is a standard document and shouldn't cost that much.

  • 1
    This is an option but I am always afraid something will happen and the guy will stop paying/move out then I am stuck with two mortgage payments. If you can afford to pay the mortgage whether he pays or not it's a good option. Feb 21, 2011 at 22:43
  • @Larry - no one is saying you have to buy a new house. Renting is an option as well.
    – MrChrister
    Feb 22, 2011 at 3:59
  • 2
    True, renting would be less risk, just make sure you can afford to pay both rent and mortgage, in the event he stops paying. At least long enough to let your rental agreement end, you could move back into the house at that point. Feb 22, 2011 at 5:47

It's a short sale.

See these for good overviews:



You'll want input from your lawyer and accountant (assuming the lender says they would accept such a sale). Best of luck - sounds like this could be a great opportunity for you if it all comes together.

DO NOT talk to a realtor. A realtor is a salesperson, whom you don't need if you have a buyer already. Like most salespeople, they are good at schmoozing, since they make a lot of money for doing so, particularly when they have no work to do. In this case, the best case scenario is that they add cost. Worst case, they will derail the sale when the bank refuses to pay the full commission.

  • 2
    Why not talk to a realtor?
    – MrChrister
    Feb 21, 2011 at 2:39
  • 12
    @MrChrister: A realtor is a salesperson, whom you don't need if you have a buyer already. Like most salespeople, they are good at schmoozing, since they make alot of money for doing so, particularly when they have no work to do. In this case, the best case scenario is that they add cost. Worst case, they will derail the sale when the bank refuses to pay the full commission. Feb 21, 2011 at 4:36
  • 1
    @duffbeer703 - sound reasonable.
    – MrChrister
    Feb 21, 2011 at 5:00
  • 3
    This is NOT a short sale situation, although it has some of the characteristics. To be a short sale the following two things would also have to be true: (a) The seller cannot pay the difference between the sale price and the mortgage balance, and (b) the bank would have to agree to the sale with a deficiency. The OP didn't say anything that tells us about (a) either way. It seems unlikely in this case that the bank would agree to (b) since it's generally an alternative to foreclosure and the OP seems to be in good credit. You usually cannot get a short sale just because you want to move.
    – user32479
    Sep 18, 2015 at 20:53

A short-sale seems like an extreme and unethical course to take.

You should read your mortgage documents or work with your attorney to read the mortgage and determine whether it is an "assumable" mortgage. If so, you might be able to get the former owner to take over the mortgage.

  • This is true, if the bank isn't on board there is no short sale possible.
    – MrChrister
    Feb 21, 2011 at 5:03
  • 4
    How is it unethical if the lender is on board?
    – gef05
    Feb 21, 2011 at 11:41
  • 2
    @gef05: You signed a contract agreeing to pay. It's one thing to do a short sale when you are without the means to pay for your home because you lost your job. It's an ethical issue, imo, when you pursue that option for your convenience. Feb 21, 2011 at 18:47
  • 2
    If you approach a bank with all the figures and they agree, how is that unethical?, you aren't walking away. You and the bank are agreeing to settle the loan for a smaller amount. Unusual?, yes, unprofitable on the bank's part? yes, unethical? I don't see it. It's no less ethical than what you are suggesting which is getting the former owner to assume a loan worth more than the property. If you don't tell him, it's unethical, but otherwise no.
    – chrisfs
    Feb 22, 2011 at 8:55
  • 2
    @duffbeer703 Please spare the moral outrage on behalf of a bank.
    – Andy
    Dec 16, 2014 at 2:41

I would offer to sell back the home for the original balance of the home loan. If they refused, then I would back out of the offer. More than likely, the original homeowner was trying to make a profit off his home by selling at at a high price and then trying to buy it back for a lower price so he gets free money.

I just find it highly improbable that he would give you the amount of your loan if the loan amount was higher than what he sold the house to you for. He's trying to scam you.

For instance, say he sold you the home for $150,000, you agreed to purchase it and you owe more than $150,000 on the home due to interests and fees on your home loan, it's likely that he's trying to buy the home back for far less than the $150,000 he sold it for and it trying to get the home for lower than $150,000. That's the scam. He sold the house hoping to buy it back for cheaper and ending up with thousands of dollars in profits for his "scam".

Don't fall for his scam.

  • 3
    How would the prior owner be running a scam here? He sold the home 5 years ago. If the balance has increased because of interest and fees (which seems unlikely, certainly not to the tune of $100k), those fees would have accrued to the bank, not the prior owner. Even if the prior owner was astute enough to predict that he could sell a home, that home would decline in value by $100k over 5 years, then he could buy it back for less than he paid, that wouldn't be a scam, that would be a rather incredible stroke of luck/ market timing. Oct 23, 2019 at 19:50

You must log in to answer this question.