Can I still do a short sale on my Florida home if I have a second mortgage or HELOC?
Yes, you can complete a Florida short sale if you have a second mortgage or HELOC. However, all mortgages and other liens against the property generally must be addressed before clear title can be transferred to the buyer.
What happens to my second mortgage or HELOC if I need to short sell my home?
Many of our short sellers have a second mortgage or HELOC (home equity line of credit). In a short sale all mortgages and liens need to be settled in order to pass clear title to the buyer and complete the sale. Here's how it works:
When the home sale price is enough to cover the entire balance on the first mortgage:
The first position lien holder (usually the first mortgage) always gets paid first. If the proceeds of the sale are enough to satisfy the first mortgage and closing costs, with something leftover for the second, a short sale with just the second mortgage will address any shortage to the second.
EXAMPLE:
John has a first mortgage with Wells Fargo for $200,000, and a second mortgage for $50,000 with Navy Federal. The house sells for $230,000. Wells Fargo gets paid in full, and John must go through the short sale process with Navy Federal as they will not get full payment.
When the home sale price is insufficient to cover the balance on the first mortgage:
Sometimes, proceeds from a sale can't pay either loan in full, and so two separate short sale negotiations must happen simultaneously with both lenders.
EXAMPLE:
John has a first mortgage with Wells Fargo for $200,000, and a second mortgage for $50,000 with Navy Federal. The house sells for $175,000. John must pursue a short sale with both lenders as neither will be paid in full.
How much does a second mortgage receive in a short sale?
Most of the time junior mortgages are assuming the largest loss in the short sale. While the first will end up with a good portion of their investment, the second mortgage will usually end up with pennies on the dollar. General guidelines have been established with the largest investors (FHA, VA, Fannie Mae, Freddie Mac) as to how much a junior lien holder will be allowed to paid out by the first in a short sale.
Will I still owe my second mortgage or HELOC after a short sale?
A lien release and debt forgiveness are not necessarily the same thing.
A second mortgage lender may agree to release its lien against the property so the short sale can close, but the seller should also determine whether the lender is waiving its right to pursue any remaining unpaid balance.
The terms of the second mortgage approval or settlement should be carefully reviewed before closing.
What if the second mortgage won't accept the payoff?
Sometimes junior lienholders can get difficult. Some loans are not backed by one of the major investors and those short sales do not fit into any established guidelines. It is in those instances that a second lien holder is likely to make your short sale more difficult, or ask for greater proceeds than originally anticipated. Holders of first and second mortgages don't always agree on what they will settle for.
EXAMPLE:
John has a first mortgage with Wells Fargo for $200,000, and a second mortgage for $50,000 with Navy Federal. The house sells for $175,000. Wells Fargo says they will allow $3,000 to go Navy Federal, however Navy Federal won't settle for less than $5,000. As you can see this presents a shortage. This obstacle must be overcome in order to get to closing.
In an instance like this one, an experienced short sale negotiator will be able to work with your lien holders in order get them to agree to a mutually agreeable payoff amount or to minimize the shortage by as much as possible to make it easier for the parties to absorb.
However, it is very possible that the shortage cannot be completely eliminated and the buyer or seller may have to come up with extra funds to satisfy the demands of the second in order to get to the closing.
What if my second mortgage has been charged off or sent to collections?
A second mortgage being charged off or sent to collections does not necessarily eliminate the debt or any lien that remains against the property. We will still need to determine who has the authority to negotiate the debt and release any lien affecting the property.
Can I still short sell my Florida home if I have more than two mortgages?
Yes, you can attempt a short sale with more than two mortgages, but multiple lien-holders will always make the short sale more challenging.
What about other liens against my Florida home?
Every lien-holder makes the short sale more complex and less likely to close, but we have had success with as many as 11 lien-holders including IRS tax liens, judgment liens, UCC liens and more.
Unpaid HOA or condominium assessments can be particularly difficult to resolve in a short sale. We will generally not take on a short sale with a substantial past-due association balance when there is no realistic way to resolve the lien and complete the transaction.
When entering into a short sale with multiple lien holders, a situation like the one described above should be anticipated. Your best defense as a seller is to have an experienced, successful short sale agent working on your behalf.
Have a Second Mortgage or HELOC and Need to Short Sell Your Florida Home?
We went through a short sale and Minna's team was amazing every step of the way. They made a very sad and stressful time seem easier by handling all the little details. They always stayed positive and put us in contact with an amazing legal team. We couldn't be more pleased.
D.H.
Last Updated on August 31, 2026 by Minna Reid
