Can a home seller sell a home for less than its mortgage?
Sellers Answers

Yes, in some cases you can sell your home for less than what you owe on the mortgage. But it is complicated and depends on the lender. This situation is known as a "short sale." Sometimes a lender will be willing to split the difference between the sale price and loan amount.

If the loan was a low-down payment mortgage with private mortgage insurance, then the lender must also involve the mortgage insurance company.