If there is a home equity line behind the first loan, the sale pays that too. Expect the payoff demand to run higher than your monthly statement, and expect a HELOC to be frozen before it can be closed.

Can you sell a house in California while you still owe on it?

Yes. Many California home loans are secured by a deed of trust, a lien recorded against the house with the county. The lien comes off when the loan is paid, and the sale is what pays it.

The number to watch is the gap between the price and the total payoff. If the price covers the payoff and your selling costs, the rest is yours. If it doesn't, you have a shortfall to plan for, which we cover below.

How does escrow pay off the loan at closing?

The escrow holder collects the buyer's funds, pays your lender and the other costs of the sale, and sends you the balance. You don't need cash on hand to clear the loan.

Once escrow opens, the escrow officer sends your lender a written demand for a payoff statement. California law lets a licensed escrow holder make that request.
At closing, the payoff comes off the price on your side of the settlement statement, with any second loan and your share of the costs.
After closing, the lender has 30 days to ask the trustee to reconvey the deed of trust, and the trustee records the reconveyance with the county.
Later, your servicer refunds what is left in your impound account, separate from your sale proceeds.

What is a payoff demand, and why is it higher than your statement balance?

A payoff demand is the lender's written statement of what it takes to pay the loan in full by a given date. It is higher than your monthly balance because it adds interest up to the payoff day, plus any unpaid fees.

The CFPB says your current balance might not reflect what you actually owe. The payoff includes interest through the day the loan is paid, fees you haven't paid yet, and a prepayment penalty if your loan has one.

California Civil Code 2943 gives the lender 21 days from a written demand to send it. For a consumer loan secured by your home, federal Regulation Z is shorter: no more than seven business days after a written request from you or someone acting for you.

The statement has to give the daily interest, often called per diem, for up to 30 days. On a $600,000 balance at 6.5%, for example, one day of interest is about $107. If closing slips past the statement's window, ask escrow for a fresh one so an old figure doesn't leave a shortfall.

Escrow can rely on the figure to close. If the lender left something out, it can still bill you for that amount later as an unsecured debt, so read the demand when escrow shares it.

Check your note for a prepayment penalty, since not all loans have one. On an owner-occupied home of one to four units, Civil Code 2954.9 allows a penalty only in the first five years and caps it at six months of interest on the amount prepaid above 20% of the original principal in any 12 months.

What happens to a HELOC or a second loan?

Each loan against the house gets its own payoff demand, and escrow pays each one at closing. A second mortgage works like the first. A HELOC needs one more step: the line has to be frozen so nothing is drawn after the payoff is set.

The CFPB's HELOC booklet says that if you sell, you are generally required to pay off the line in full right away. In California, Civil Code 2943.1 sets the steps: escrow prepares a form called the Borrower's Instruction to Suspend and Close Equity Line of Credit, and you sign it. The lender then has to suspend the line for at least 30 days. Once it has the signed form and the payoff, it has to close the line and release its lien.

Stop drawing on the line once you decide to sell, so the payoff stays accurate.
Look for an early termination fee in the payoff. The CFPB's booklet lists it among the costs to compare.
After closing, confirm the HELOC lien was reconveyed along with the first loan.

A reverse mortgage is also paid from the sale, but it runs on its own clock, and the federal seven-day payoff limit relaxes to a reasonable time for it. Our page on selling an inherited house puts it this way: a reverse mortgage "adds a payoff deadline the estate should not ignore, so mention it early and we will work to that clock."

What if you owe more than the house is worth?

Then the price can't cover the payoff, and the difference has to come from somewhere before the lenders release their liens. A cash sale doesn't fix this, and we'd rather tell you now.

Say a house would sell for $850,000, and the first loan and HELOC come to $900,000. That $50,000 gap, plus selling costs, has to be settled:

Bring cash to closing to cover the difference.
Wait, if you don't need to move. Payments and time can close the gap.
Ask for a short sale, which the CFPB describes as selling for less than you owe with your lender's agreement. With two loans, each lender has to agree to take less.

The CFPB notes that in some states a lender can sue after a short sale for the rest of the debt. California limits that. Under Code of Civil Procedure 580e, when a lender gives written consent to a short sale of a home of one to four units and the sale closes as agreed, it can't collect a deficiency on a note secured only by that deed of trust. The rule doesn't cover sellers that are a corporation, LLC or limited partnership.

The IRS generally treats canceled debt as income, and its exclusion for a main home covers only debt discharged before January 1, 2026, or under a written arrangement made before then. Talk to a tax adviser before you sign.

If your payoff is higher than a cash offer, a sale to us won't close that gap. Our FAQ says it directly: "We pay fair prices, but not always full market value. For houses needing repairs, we calculate fair prices by subtracting repair costs." A listing may cover a loan a cash offer can't. Our guide to short sale vs foreclosure covers the case where nothing does.

How does a cash sale compare with listing when there is a payoff?

Your lenders get paid the same way on either route. What changes is the price, the costs taken out before you're paid, and how many months of interest you carry:

Price: A listing reaches the open market and can bring full market value, especially for a house in good shape. Our offer is fair but, as our FAQ says, not always full market value.
Agent commission: On a listing it's negotiable. Clever Real Estate's August 2026 survey of 50 California agents put the average at 5.08% of the price for both agents combined. We cover the standard closing costs and there is no agent commission on our side.
Transfer tax: It applies to either sale. Old Republic Title's 2024 Bay Area guide lists the county rate of $1.10 per $1,000, the rate state law allows, plus city taxes in Oakland, Berkeley, San Francisco and other cities. The contract says who pays, so ask any buyer, us included. Our guide to closing costs in California covers the other fees.
Repairs and showings: A listing means preparing the house, showings and repair requests after inspection. We buy as-is. Unpermitted work and open code issues are normal on older Bay Area homes, and we take them on and account for them in the offer.
Time: Each month before closing adds a month of interest to the payoff. On our side: "We can make an offer within 24 hours. We can close in as little as 7 days when the title is clear; 30 to 60 days is typical."

As an example only, take a house that sells for $1,200,000 on a listing, in a city with no city transfer tax. The first loan's payoff is $610,000 and the HELOC's is $85,000:

Payoffs: $695,000
Commission at 5.08%: $60,960
County transfer tax, if the contract has you pay it: $1,320
Left before any other fees: about $442,720

With the same payoffs and no commission, a cash offer of about $1,139,000 leaves you the same amount. That is before you count repairs, prep and any extra months of interest while the house is on the market.

If your house is in good shape and you have a few months, a listing may leave you more. We're a better fit when the house needs work, the timing is tight, or you'd rather skip showings. See how selling your Bay Area house to us works. Once you accept, a dedicated transaction coordinator handles the sale.

Frequently asked questions

Do I have to pay off my loan before listing?

No. You can list the house or accept an offer with the loan in place. Escrow orders a payoff demand, pays the loan from the sale at closing and sends you the rest. Keep making payments until then, since missed payments and late fees get added to the payoff. You need your own cash only if the payoffs and selling costs exceed the price.

How long does a lender take to send a payoff demand?

California Civil Code 2943 gives the lender 21 days from a written demand by you or escrow. For a consumer loan secured by your home, federal Regulation Z allows a reasonable time and no more than seven business days. The seven-day limit gives way when the loan is in bankruptcy or foreclosure, is a reverse mortgage, or a natural disaster interferes. Ask early.

What is a deed of reconveyance?

It is the recorded document that clears your deed of trust from the county record once the loan is paid. Under Civil Code 2941, the lender has 30 days after payoff to send the trustee a request for full reconveyance, and the trustee then has 21 days to record it. If nothing is recorded within 75 days, a title insurer can record a release instead. A fee of $45 or less is presumed reasonable.

What happens to my impound account?

The money in it is yours. An impound account holds your property tax and insurance money; federal rules call it an escrow account. Under Regulation X, once the loan is paid in full, the servicer has to return the balance within 20 days, not counting weekends and legal public holidays. It comes after closing, separate from your proceeds, unless you agree to move it to a new loan with the same lender or servicer.

Can I sell if I am behind on payments?

Often, yes. The missed payments, late fees and other charges go into the payoff, so the sale has to cover a bigger number. Ask for the payoff demand early. Once a notice of default is recorded, the state's 21-day duty applies only if your demand arrives before the notice of sale is first published. Our page on selling before foreclosure covers the first steps.

Who pays the county and city transfer taxes?

The purchase contract decides, and custom differs by county and city. Old Republic Title's January 2024 Bay Area guide shows sellers customarily paying the county tax, and in San Francisco paying the city tax, which includes it. In Alameda, Contra Costa, San Mateo and Santa Clara counties, city taxes are customarily split between buyer and seller. Custom is negotiable, so ask any buyer who pays each tax, us included.

See your numbers, on your timeline

If you'd like to see a cash offer next to your payoff demand, start with how selling your house to us works and weigh it against a listing at your own pace. When you're ready, contact us or call (510) 283-9871. No pressure, and no rush.

This guide is general information, not legal or tax advice. If your case turns on the details, talk to a California real estate attorney or a tax adviser.

Selling a House With a Mortgage in California: How the Payoff Works