Last updated October 29, 2026

Selling a House Worth Less Than the Mortgage During a Florida Divorce

Short answer: You can sell a house worth less than the mortgage during a divorce, but a sale for less than the payoff needs the lender's approval, which is called a short sale. The lender decides whether to accept less and on what terms. For an owner-occupied home, Florida caps any deficiency at the outstanding debt minus the fair market value on the date of sale (section 702.06). Forgiven debt can be taxable income. Your attorney and CPA decide those questions.

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Real-estate side only, not legal or tax advice. Your family-law attorney decides the legal questions. We never pay attorneys for referrals.

Key takeaways

A short sale closes only if the lender approves it; no one can promise approval or a waiver of the shortfall.
For an owner-occupied home, a deficiency may not exceed the outstanding debt minus the fair market value on the date of sale (s. 702.06).
A one-year limit applies to deficiency actions on one-to-four-family homes, running from the day after the clerk issues the certificate in a foreclosure or the lender accepts a deed in lieu (s. 95.11(6)(g)); the statute names no short-sale trigger.
The federal exclusion for forgiven principal-residence debt covers only discharges before January 1, 2026, or under a written arrangement made before then (26 U.S.C. 108(a)(1)(E)).
We never pay attorneys for referrals, and we do not buy houses from the owners we list for.

Real-estate side only. This is general information, not legal or tax advice, and no attorney-client relationship is created by reading it. PBP Real Estate, LLC is a licensed Florida real estate brokerage (License CQ1064615), not a law firm. Your family-law attorney decides the legal questions in your case, a CPA decides the tax questions, and a lender decides any refinance.

What happens if my house becomes worth less than my mortgage during a Florida divorce?

The house can still be sold, but someone has to cover the gap. At closing, every mortgage on the house must be paid off or released. If the price will not cover the payoff and the costs of sale, the options owners usually discuss with their attorneys are these:

Bring money to closing. The owners pay the shortfall themselves, in whatever split their agreement or the court sets.
One spouse keeps the house and the loan. Whether the other borrower is released from the note is the lender's decision, not the divorce court's.
A short sale. The lender agrees to accept less than the payoff to release its mortgage.
Wait. Prices and the loan balance both move; carrying costs keep running, and someone has to pay them.

Which path is right for you is a question for your family-law attorney, and for a CPA on the tax side. First, find out whether the house is underwater at all. A written opinion of value from closed sales, compared with a current payoff statement, answers that.

How does a short sale work during a divorce in Florida?

Like any short sale, with two owners who both have to sign. The lender, and sometimes the investor or insurer behind the loan, reviews the file and decides. In general the steps are:

List at market value. Lenders compare the offer with their own view of the market, so an inflated list price wastes time.
Submit the file. Lenders usually ask for a hardship explanation and financial documents from each borrower. A divorce is a common reason given; what each spouse writes is their own, reviewed with their attorney.
Present offers. Every offer goes to the owners, and the accepted contract goes to the lender for review.
Read the approval letter. It states the net the lender will accept and whether it reserves the right to pursue a deficiency. Your attorney reads it before anyone signs.

Second mortgages and home equity lines need their own approval. For the full process, see our short sale guide and how a short sale works step by step.

Can the lender come after us for the rest of the mortgage in Florida?

It can, unless it agrees otherwise in writing. Two Florida statutes set the outer limits:

Rule	What it says	Source
Deficiency cap	For owner-occupied residential property, the deficiency may not exceed the judgment amount, or in a short sale the outstanding debt, minus the fair market value on the date of sale	s. 702.06
Time limit	An action to enforce a deficiency on a note secured by a mortgage on a one-to-four-family home must be brought within one year, starting the day after the clerk issues the certificate or the lender accepts a deed in lieu of foreclosure	s. 95.11(6)(g)

How these rules apply to your loan, including how the time limit runs after a short sale, is a question for your attorney. In the divorce, the settlement or the court also decides how any remaining debt is divided between the spouses. That division binds the two of you; it does not change what the lender can collect from each borrower.

Is forgiven mortgage debt taxable after a short sale in 2026?

It can be. Under federal tax law, debt a lender forgives can be income. The exclusion for forgiven debt on a principal residence, 26 U.S.C. 108(a)(1)(E), applies only to debt discharged before January 1, 2026, or discharged under an arrangement entered into and evidenced in writing before January 1, 2026. Section 108(a) lists other exclusions, and section 108(a)(2) sets which one applies when more than one could.

Whether any of them applies to you is your CPA's decision. Ask before you sign the approval letter, not after.

What does PBP do in a divorce short sale?

We sell the house and keep the file moving with the lender. Gia Freer prepares a written opinion of value by hand from closed sales, houses compared with houses and condos with condos, so both owners start from the same number. We list the house, collect what the lender asks for, present every offer in a timely manner as section 475.278(2) requires, and report what the lender says. Our commission is set in the listing agreement and paid at closing. We do not buy the house, and we do not give legal or tax advice.

Gia Freer, Broker of Record (Florida license BK689801), handles every divorce file personally. Gia and Grant Freer have closed 767 transactions and $203,762,527 since 2000, 671 of them since 2013 (Beaches MLS, agent production report, as of October 19, 2026).

One number you can both look at

Tell us about the house and what you believe is owed, so Gia can compare the two. Gia Freer, our Broker of Record, reviews it personally and replies within one business day. No automated estimate is produced, and what you share stays confidential.

Have Gia review my options or call (561) 395-8418. Prefer to read first? See how we price a home.

General information from a licensed Florida real estate brokerage; it is not legal or tax advice. Your family-law attorney decides the legal questions. We never pay attorneys for referrals.

Underwater house in a divorce: questions

What happens if the house is worth less than the mortgage in a Florida divorce?

The house can still be sold, but a sale for less than the payoff needs the lender's approval, which is called a short sale. The lender decides whether to accept less and on what terms. Your family-law attorney advises on how the shortfall is handled between you.

Can the lender come after us for the rest of the loan after a short sale in Florida?

It can, unless the lender agrees otherwise in writing. For an owner-occupied home, section 702.06 caps a deficiency at the outstanding debt minus the fair market value on the date of sale. Whether a waiver is offered is the lender's decision, and your attorney reads the approval letter.

Is forgiven mortgage debt taxable in 2026?

It can be. The federal exclusion for forgiven debt on a principal residence, 26 U.S.C. 108(a)(1)(E), covers only discharges before January 1, 2026, or under an arrangement entered into and evidenced in writing before that date. Your CPA decides whether any exclusion applies to you.

Do both spouses have to agree to a short sale?

In practice, usually yes. The lender typically needs the borrowers on the loan and the owners on the title to sign, and a court order can stand in where the owners disagree. Your attorney and the title company confirm who signs.

Does PBP promise the lender will approve a short sale?

No. No one can promise that. The lender decides. We prepare the listing and the file the lender asks for, present every offer, and tell you what the lender says.

Sources and legal references

This page summarizes Florida family law, real-estate law and federal tax rules for homeowners. The primary sources are below; for your own case, rely on your family-law attorney, and on a CPA for tax.

Florida Constitution, Article X, Section 4: Homestead; exemptions — The Florida Senate
Section 61.075, Florida Statutes: Equitable distribution of marital assets and liabilities — Florida Legislature (Online Sunshine)
Section 61.077, Florida Statutes: Setoffs or credits upon sale of marital home — Florida Legislature (Online Sunshine)
Section 689.15, Florida Statutes: Estates by survivorship — Florida Legislature (Online Sunshine)
Section 475.278, Florida Statutes: Authorized brokerage relationships — Florida Legislature (Online Sunshine)
Section 475.612, Florida Statutes: Certification of appraisers (opinion of value is not an appraisal) — Florida Legislature (Online Sunshine)
26 U.S.C. 121: Exclusion of gain from sale of principal residence — Legal Information Institute, Cornell Law School
26 U.S.C. 1041: Transfers of property between spouses or incident to divorce — Legal Information Institute, Cornell Law School
IRS Publication 523, Selling Your Home — Internal Revenue Service
Chapter 702, Florida Statutes: Foreclosure of Mortgages and Statutory Liens — Florida Legislature (Online Sunshine)
Section 702.06, Florida Statutes: Deficiency decree — Florida Legislature (Online Sunshine)
Section 95.11, Florida Statutes: Limitations other than for the recovery of real property — Florida Legislature (Online Sunshine)
Section 45.0315, Florida Statutes: Right of redemption — Florida Legislature (Online Sunshine)
12 CFR 1024.41: Loss mitigation procedures — Electronic Code of Federal Regulations (eCFR)
26 U.S.C. 108: Income from discharge of indebtedness — Legal Information Institute, Cornell Law School
Florida DBPR license record: PBP Real Estate, LLC, real estate corporation CQ1064615 — Florida Department of Business and Professional Regulation
Florida DBPR license record: Gia Freer, real estate broker BK689801 — Florida Department of Business and Professional Regulation
Florida DBPR license record: Grant Freer, real estate broker BK3077984 — Florida Department of Business and Professional Regulation

Published by Gia Freer, Broker of Record, PBP Real Estate, LLC · Florida broker license BK689801 · brokerage license CQ1064615. Last updated October 29, 2026.