Divorce is never easy—and when there’s a house involved, things can get even more complicated. If the mortgage balance is higher than the home's value, a short sale might be the best solution. But how does that work when both spouses are going through a split?

In this post, we’ll walk through how a short sale works during a divorce, what both parties need to know, and how to avoid common pitfalls.

Understanding Ownership During Divorce

In most divorce situations, both spouses are listed on the mortgage and/or the title. That means both must agree to sell, even if only one plans to stay in the home short-term.

 - If both spouses are on the loan: Lender approval and signatures are required from both parties.

 - If only one is on the loan, but both are on title: You may still need both to sign off to complete a sale.

During divorce proceedings, legal agreements such as a separation agreement or divorce decree can outline who is responsible for the mortgage and how the property should be handled.

Important: Short Sale Cooperative is not a law firm. If legal guidance is needed, consult a family law attorney.

When a Short Sale Makes Sense in Divorce

Here’s why couples often turn to short sales during a divorce:

 - The home’s value is less than the mortgage balance.

 - Neither party can afford the mortgage on their own.

 - Selling the home traditionally isn’t feasible due to market conditions or needed repairs.

 - The lender is threatening foreclosure.

Rather than falling behind on payments and damaging both parties’ credit, a short sale allows for a more controlled exit strategy.

Learn more about the credit impact of a short sale.

Steps Divorcing Couples Should Take Before a Short Sale

 1. Open communication. Both spouses need to agree to cooperate.

 2. Review the mortgage and title. Know who’s legally responsible.

 3. Consult your divorce attorney. Make sure property decisions align with the divorce decree.

 4. Work with a short sale expert. Choose a professional who can manage communication between all       parties and the lender.

We have a full breakdown of the short sale stages for homeowners here.

Handling Proceeds and Deficiencies

In most short sales, there are no proceeds — because the home sells for less than what’s owed. However, lenders may:

 - Require one or both spouses to sign a promissory note for the remaining balance.

 - Agree to forgive the deficiency entirely.

This is where your divorce agreement becomes critical. It should specify who is responsible for any remaining debt or tax implications if applicable.

Also, be sure to get any deficiency waivers in writing from your lender.

Why Timing Matters

Lenders and courts operate on different timelines. If your divorce isn’t finalized yet, the process can be slower. But the earlier you start the short sale process, the more control you’ll both have over the outcome.

The Right Help Makes the Difference

Navigating a short sale during divorce is emotionally and financially complex. But with clear communication and the right guidance, it’s possible to avoid foreclosure and start fresh.

If you're in this situation, reach out to our homeowner support team to see what options are available. We're here to help you through it with compassion and strategy.