What if we owe more than the house is worth?

Check the math first

Underwater is a calculation, not a feeling. Get written payoff statements for every loan on the house, a market analysis or appraisal for the likely price, and an estimate of the costs of sale, then run them through the equity split tool. Sometimes the gap turns out smaller than either of you feared, and sometimes it's bigger.

Either way, you'll both be looking at the same number.

The general options

If you sell at market value, someone has to cover the shortfall at closing, because every loan on the house has to be paid off for the sale to close. That cash can come from one of you, both of you, or other assets your attorneys trade against it.

A short sale is a sale where the lender agrees to accept less than it's owed. It's entirely the lender's decision, it adds the lender's review to the timeline, and the lender sets its own conditions. Ask a CPA how any amount the lender forgives would be treated for you, and ask your attorney what the lender's approval letter actually releases.

Keeping the house for now is the third path. One of you stays, or you rent it, and you sell or refinance later, which only works if the payments can be carried and the terms are in writing. Is a deferred sale an option? covers what that agreement should say.

Who covers the gap

Debt is part of the property division. Under ORS 107.105(1)(f), the court divides property as may be just and proper and considers reasonable costs of sale, so how a shortfall is shared belongs in your settlement or your judgment, not in a hallway conversation with me. The situation page on selling when the house is underwater goes deeper.

Before you decide

Don't pick a path on a hunch. Get the payoff figures, a market analysis and an honest look at whether either of you could carry the house alone, then take all of it to your attorney and a CPA. Paying the gap, asking for a short sale and waiting each change your tax picture, your credit and your timeline in different ways, and those are questions for them, not for a broker.

I can give you both the market side. That part I know.