{"id":565,"date":"2026-07-06T05:50:33","date_gmt":"2026-07-06T05:50:33","guid":{"rendered":"https:\/\/www.prudenthomebuyers.com\/blog\/?p=565"},"modified":"2026-07-07T06:37:06","modified_gmt":"2026-07-07T06:37:06","slug":"sell-house-with-negative-equity-salt-lake-city","status":"publish","type":"post","link":"https:\/\/www.prudenthomebuyers.com\/blog\/sell-house-with-negative-equity-salt-lake-city\/","title":{"rendered":"How to Sell a House with Negative Equity in Salt Lake City"},"content":{"rendered":"

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Selling a negative equity house in Salt Lake City comes down to three practical paths. First, you can cover the gap yourself at the time of closing. Second, you can ask your lender to sign off a short sale. Third, you can hand the house back through a deed in lieu of foreclosure. While none of them will magically erase what you owe, they may make your situation easier.<\/span><\/p>\n

Let\u2019s say this year your priorities changed and while you wanted to sell your home with a mortgage, the money you\u2019d get wouldn\u2019t be enough to pay back what you owe. Your friends and family told you that you were underwater on your mortgage or upside down on your loan. If you think you are facing something similar, maybe this guide can help you learn how to deal with it. Read along to learn what it costs, how long it takes, and what to watch out for.<\/span><\/p>\n

What Does It Mean When a House Has Negative Equity?<\/b><\/h2>\n

In simple words, it means you owe more money than your house will sell for. For example you bought a place in West Jordan back in 2022 for $480,000. Prices in the upcoming years came down in parts of the valley and now your house would sell for $430,000. But you are originally clearing a loan of $480,000 and you are now short by $30,000. This is negative equity. <\/span>
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\n<\/span>This may happen because you purchased a property when the market is on peak or simply because the market moved faster than you expected.\u00a0<\/span><\/p>\n

Is this happening to a lot of people in Salt Lake City?<\/b><\/h2>\n

The number of underwater homes in Salt Lake City has risen. You can take a peek into <\/span>ATTOM\u2019s Home equity and underwater report<\/span>.<\/span><\/a> You’ll find that the share of underwater mortgages in Utah has increased from 2% to 2.5% between the end of 2023 and the end of 2024. Also, the equity-rich homes dropped from 56.8% to 52.4%. Salt Lake City\u2019s median home price was around $580,000 in mid 2025 as per <\/span>Redfin<\/span><\/a>. Thus, if you bought your home between 2021 and 2023, there may be a chance you\u2019d face negative equity when you decide to sell your home. So no, you\u2019re not the only one dealing with this.<\/span><\/p>\n

Your Options to Sell a house with Negative Equity\u00a0<\/b><\/h2>\n

Option 1: Pay the Difference Yourself<\/b><\/h3>\n

The simplest option is to sell the house normally. Simply list it on the Utah MLS, find a buyer, and then agree on a price. Once you receive the money from the buyer, pay off the loan. After that, write a check for whatever\u2019s left. This situation may differ from seller to seller. Sometimes closing costs get in and you may have to add agent commissions, title fees, and insurance. So before you decide to sell, do the full math and not just the loan-balance math. If this option works for you, it’s a clean way out. If it doesn\u2019t, maybe check out more options?<\/span><\/p>\n

Option 2: Ask Your Lender for a Short Sale<\/b><\/h3>\n

Let\u2019s say you bought a home in Taylorsville at $420,000. Just after a few years you lost your job one unfortunate day and now you are three months behind on payments. Homes in your location are going for around $385,000. Now, it’s unrealistic for you to deal with the situation with no fixed income coming in. In this situation, you can simply find a buyer and convince the bank to accept the amount your home will currently get sold for. You can convey the job loss, financial strain, and the buyer\u2019s final offer. Maybe, this option may help you dissolve the $35,000 difference. However, sometimes banks may want you to pay that money once you\u2019ve gained financial stability.\u00a0<\/span><\/p>\n

Option 3: Deed in Lieu of Foreclosure<\/b><\/h3>\n

This option lets you hand the house back to the bank on your own terms. You sign a deed and the lender releases you from the loan and you walk away. However, your credit may still take a hit. But this way you don\u2019t face foreclosure and the exit is more controlled. Also, before you sign anything, make sure you connect with a Utah real estate attorney to check the paperwork for the words \u201cFull Satisfaction\u201d of the debt. Sometimes, when those words aren\u2019t there, the lender may still come after you for money down the road.<\/span>
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Quick Comparison of a short sale vs. deed in lieu:<\/b>
\n<\/span><\/h2>\n\n\n\n\n\n\n\n\n\n
<\/td>\nShort Sale<\/b><\/td>\nDeed in Lieu<\/b><\/td>\n<\/tr>\n
Do you need to find a buyer?<\/span><\/td>\nYes<\/span><\/td>\nNo<\/span><\/td>\n<\/tr>\n
Does the bank have to approve it?<\/span><\/td>\nYes<\/span><\/td>\nYes<\/span><\/td>\n<\/tr>\n
Hurts your credit?<\/span><\/td>\nYes<\/span><\/td>\nYes<\/span><\/td>\n<\/tr>\n
Could the bank still chase you for money?<\/span><\/td>\nYes, unless waived in writing<\/span><\/td>\nYes, unless waived in writing<\/span><\/td>\n<\/tr>\n
How long does it take?<\/span><\/td>\nWeeks to months<\/span><\/td>\nUsually faster once approved<\/span><\/td>\n<\/tr>\n
When does it make sense?<\/span><\/td>\nYou found a buyer<\/span><\/td>\nShort sale already failed<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Could a Short Sale Leave You with a Tax Bill?<\/b><\/h2>\n

Yes, a short sale may leave you with a tax bill. If your lender is ready to forgive part of your loan through a short sale or deed in lieu, the IRS might count that forgiven amount as income. This means you could owe taxes on money you never actually received. Here\u2019s how you can picture it:<\/span>
\n<\/span>
\n<\/span><\/p>\n\n\n\n\n\n\n\n
Financial Scenario\u00a0<\/b><\/td>\nAmount<\/b><\/td>\n<\/tr>\n
What you owed<\/span><\/td>\n$500,000\u00a0<\/span><\/td>\n<\/tr>\n
What the house sold for<\/span><\/td>\n$450,000<\/span><\/td>\n<\/tr>\n
Amount forgiven by the bank<\/span><\/td>\n$50,000<\/span><\/td>\n<\/tr>\n
Amount that could count as taxable income<\/span><\/td>\n$50,000<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

You read that right! The $50,000 never touched your bank account, still under federal tax rules, it could be treated like income. You don\u2019t need to stress about this situation. Talk to a CPA or a tax professional before your sale closes and not after you\u2019re already surprised by a tax bill.<\/span><\/p>\n

Try Renting Out your home and wait<\/b><\/h2>\n

If you aren\u2019t in a rush to move to another city or place, rent out the property. It may give you more time to wait for home values to recover. You\u2019d be surprised, but sometimes the rental income can help offset your mortgage while you hold onto the house. This option would work for you if you are comfortable being a landlord. Also works when you want to buy some time for the market to improve before you finally sell it.\u00a0<\/span><\/p>\n

What About Just Letting it Go to Foreclosure?<\/b><\/h2>\n

You may think that this is an option for you, but it wouldn\u2019t ease your situation as you think. Foreclosure will sit on your credit report for seven years. It will also make it a lot harder for you to get another mortgage, rent an apartment, or even pass some job background checks. In Utah, foreclosures move through a \u201cnon-judicial\u201d process. This means they can happen pretty fast once they start.<\/span><\/p>\n

So if you are behind on payments, you should act fast and seek better options. Also, if you\u2019re worried about losing your home, read our guide on <\/span>how to avoid foreclosure<\/span><\/a>.\u00a0<\/span><\/p>\n

Useful Tips to Handle a negative equity home sale in Utah<\/b><\/h2>\n