An underwater mortgage, also called an upside-down mortgage, means you owe more on the loan than the home is worth. You can still sell for less than you owe, but only if you bring cash to closing to cover the gap or your lender approves a short sale. Example: at Herriman's typical home value of $601,499 (Zillow, August 2026), an owner with a $640,000 payoff is about $38,500 underwater before any selling costs.
At a glance
| Herriman typical home value | $601,499 (Zillow, August 2026) |
|---|---|
| Change since August 2022 | 2.2% lower (Zillow, Herriman city) |
| Short sale deficiency deadline | Three months after reconveyance (Utah Code 78B-2-313) |
What is an underwater mortgage?
Equity is the home's market value minus everything secured against it. When that number is below zero, the loan is underwater and the owner has negative equity. Being underwater is not a default on its own: if you keep paying, nothing happens to the loan. It becomes a problem when you need to sell, refinance or move, or when a hardship makes the payment hard to keep up.
How to tell if your home is underwater
Get a payoff figure from your servicer
The balance on a monthly statement is not what it takes to clear the loan. Ask the servicer for a written payoff, which adds accrued interest and any fees, and do the same for a second mortgage or home equity line.
Estimate what the home would sell for
Zillow's typical value describes a whole city, not your house. Recent comparable sales nearby, condition and lot give a better estimate, and in a short sale the lender will order its own valuation.
Subtract selling costs and other liens
Commission, title and closing costs come out of the price, so a home can be underwater on a sale even when the value is slightly above the loan. In Utah an HOA has a lien for unpaid assessments, collection costs and certain fines, and that lien outranks other liens except tax and government liens, liens recorded before the declaration, and a first or second mortgage recorded before the HOA's notice of lien (Utah Code 57-8a-301). Unpaid dues therefore have to be cleared at closing as well.
Why some Herriman owners are underwater in 2026
Herriman values rose fast into 2022 and then slipped. Zillow's typical home value for the city was $614,921 in August 2022 and $601,499 in August 2026, which is 2.2% lower. Someone who bought near that high with a small down payment, or who later added a second loan, may now owe more than a sale would net.
| Zillow typical home value | August 2022 | August 2026 | Change |
|---|---|---|---|
| Herriman city, all homes | $614,921 | $601,499 | 2.2% lower |
| ZIP 84096 single-family (also covers areas outside Herriman) | $646,851 | $630,723 | 2.5% lower |
| ZIP 84096 condos (also covers areas outside Herriman) | $474,817 | $456,355 | 3.9% lower |
ZIP 84096 is not the same as the city: it also takes in part of Riverton and a large unincorporated area. More on prices, HOAs and tax is on Herriman home values.
Can you sell a house for less than you owe?
Yes, but the lender has to be paid or has to agree. A buyer will not close unless the title is clear, and every lien must be paid off or released at closing.
Pay the difference at closing
If the gap is small, you can bring savings or other funds to closing. You keep control of the sale and the lender is paid in full.
Ask for a short sale
The lender reviews your hardship, finances and the buyer's offer, then decides whether to accept less than the payoff. What a short sale is and why lenders agree covers the basics, and the short sale timeline and lender package covers the paperwork.
Weigh a cash offer carefully
A cash buyer's offer below your payoff still needs the lender's approval. Before signing, compare cash, listed and short sale options for Herriman sellers.
Other options when you owe more than the home is worth
Keep the home and keep paying
If the payment is affordable and you do not need to move, staying put lets the balance fall and values change over time. No one can promise a recovery.
Forbearance or a loan modification
These change the payment, not the negative equity. The options and how to apply are on ways to avoid foreclosure in Utah.
Deed in lieu or foreclosure
Handing the deed back or letting the lender foreclose both end ownership without a sale. In Utah, a trustee foreclosure follows a fixed clock described in the Utah foreclosure timeline.
Utah rules that matter after an underwater sale
The gap a lender forgives is called a deficiency. Under Utah Code 78B-2-313, a lender's lawsuit to collect it after a short sale of single-family residential property is barred unless filed within three months after the release or reconveyance is recorded. That bar does not apply if there was fraud, or if you signed an agreement to pay part of the deficiency, so read the approval letter before signing.
Forgiven debt can also be taxable. As of 2026, the federal exclusion for forgiven principal-residence debt applies only to debt discharged before January 1, 2026, or under a written arrangement made before then, and Utah income tax starts from federal adjusted gross income. Short sale taxes and the 1099-C explains the rules, and short sale credit effects covers buying again.
Example: a Herriman home bought at the 2022 high
This is an illustration, not a real sale. An owner bought a home in 2022 for about Zillow's August 2022 Herriman figure, $614,921, and now owes $640,000 including a second loan. The home is worth about $601,499, the August 2026 typical value. A sale at that price is about $38,500 short of the payoffs before commission and closing costs, so the owner needs either cash to cover the gap or the lenders' approval of a short sale. If the lenders approve, the three-month deficiency deadline starts when the reconveyance is recorded.
Get advice before you sign
Whether a short sale, a cash payment or another option fits depends on your loan, your other debts and your tax picture. Ask a CPA or tax professional about forgiven debt, a Utah attorney about deficiency agreements and approval letters, and a HUD-approved housing counselor (found through the CFPB's counselor search) about the options your servicer offers.
Frequently asked questions
Can I sell my house for less than I owe?
Yes, if every lien is paid or released at closing. You can bring cash to cover the shortfall, or ask your lender to approve a short sale and accept less than the payoff. A buyer cannot get clear title until the lender is paid in full or signs off. In Utah, a lender that approves a short sale has three months after the reconveyance is recorded to sue for any deficiency, with exceptions.
What does upside down mortgage mean?
It means the same as underwater: the loan balance is higher than the home's market value, so the owner has negative equity. For example, a Herriman home at Zillow's typical value of $601,499 (August 2026) with a $640,000 payoff is about $38,500 upside down before selling costs.
Is mortgage forbearance a good idea?
It can help if a hardship is short-term, because it pauses or lowers payments for a set period. The skipped amounts still have to be repaid or rolled into the loan, and forbearance does nothing for negative equity. If the hardship is permanent, compare it with a modification, a sale or a short sale, and ask a HUD-approved housing counselor.
What happens if the bank that owns my mortgage goes under?
The debt does not disappear. A mortgage is an asset, so it passes to another company, and the note you signed still governs it. Keep paying on schedule, watch for a written notice naming a new servicer, and confirm any change with the old servicer before sending payments to a new address.
How do I get out of an underwater mortgage?
The main routes are paying the gap at closing, a lender-approved short sale, a deed in lieu, or keeping the home and paying until values or the balance change. Foreclosure also ends the loan but carries its own risks. Start by getting a written payoff and a realistic estimate of what the home would sell for.
Does a short sale clear what I still owe in Utah?
Not automatically. The approval letter may forgive the rest or include an agreement to pay part of it. Utah Code 78B-2-313 bars a deficiency suit filed more than three months after the reconveyance is recorded, but not if you signed a deficiency agreement or fraud was involved. Have a Utah attorney read the letter before you sign.
Sources
- Zillow Research: Home Value Index, cities (August 2026)
- Zillow Research: Home Value Index, ZIP codes, single-family (August 2026)
- Zillow Research: Home Value Index, ZIP codes, condos (August 2026)
- U.S. Census Bureau: 2020 ZCTA5-to-Place relationship file
- Utah Legislature: Utah Code 57-8a-301
- Utah Legislature: Utah Code 78B-2-313, Action to recover deficiency after short sale
- Cornell LII: 26 U.S. Code 108, Income from discharge of indebtedness
- Utah Legislature: Utah Code 59-10-103
- CFPB: Find a housing counselor