Two different documents, two different positions
Almost every problem in this situation comes from one confusion, so it is worth being precise before anything else.
The note is the promise to repay the loan. Whoever signed it owes the money. A co-signer or co-borrower is on the note, and the lender can look to them if the payments stop. The loan appears on their credit.
The deed is ownership of the property. Whoever is on it owns the house, and whoever is on it has to sign to sell it.
These are separate. Somebody can be on the note and not on the deed, which is the classic co-signer position: all of the liability and none of the ownership. Somebody can be on the deed and not on the note, which happens too. And plenty of people are on both.
Which combination you have decides everything that follows, including the one practical question: does the co-signer have to sign the deed at closing? If they are on the deed, yes. If they are only on the note, generally no, although they have a very real interest in the sale happening properly.
How to find out which one applies
- Read the deed. Not the mortgage statement, not the closing papers from eight years ago, the deed. Our page on getting a Tulsa County deed copy covers how to pull it, and our page on Tulsa County property records covers reading what is recorded
- Read the note and the mortgage, and note who signed each. They are not always the same people
- If the deed names more than one of you, note how title is held, because that affects what happens if one of you dies before the sale closes
- Check the lender's records if the documents are missing, and ask the servicer who is on the loan
Do this before you have a conversation with the co-signer about selling, because the conversation is different depending on the answer.
What a sale does for a co-signer
Where the sale pays the loan off in full, the co-signer's liability on that loan ends with it. That is usually the thing they most want, and it is worth saying to them directly, because a co-signer who understands that the sale releases them is a co-signer who cooperates.
- If they are on the deed, they sign the deed at closing and they receive their share of the proceeds according to how title is held and whatever you have agreed between you. Agree that in writing beforehand
- If they are only on the note, they do not sign the deed and they do not receive proceeds. They do get the loan paid off, which is the point
- Either way, get them the payoff confirmation afterwards. A co-signer wants evidence the loan is closed, and their credit report will take a little time to catch up
If the sale will not clear the loan
This is the hard version and it has to be faced rather than hoped through.
If the house sells for less than is owed, somebody still owes the difference, and that somebody includes the co-signer. You cannot sell your way out of a shortfall without the lender's agreement.
- Work out the real numbers first: the payoff figure from the servicer, every lien and charge against the property, and a realistic sale figure. Our net proceeds calculator holds both columns
- Talk to the servicer about what it will accept. A short sale needs the lender's written approval and takes materially longer than a normal sale. Our article on short sale against deed in lieu covers the two routes
- Tell the co-signer the truth, early. They are exposed to the shortfall and they are entitled to know before it happens, not after
- Take advice. A deficiency after a sale and a deficiency after a foreclosure are different, and our article on deficiency judgments in Oklahoma covers what can follow
- If payments have already been missed, the clock may be running on something else as well. Our page on stopping a Tulsa foreclosure covers the timing
The alternatives to selling
Selling is one route and it is not always the right one.
- Refinance into your own name and release the co-signer, if you can qualify. This is what most co-signing arrangements were always supposed to end with
- Ask the servicer about a release of liability. Some loans have a mechanism for removing a borrower without a full refinance. Whether yours does is a question for them, and the answer is frequently no, which is worth knowing rather than assuming
- Assumption, where the loan allows it. Our article on assumable mortgages covers when that is possible
- Keep paying and do nothing, which is legitimate if everybody is content, and which stops being legitimate the moment the co-signer wants out and nobody will discuss it
A co-signer carrying a loan on a house they do not own, years after everybody expected it to be refinanced, is a common and genuinely unfair position. If that is your situation, it is reasonable to ask for a timetable.
What to do, in order
- Read the deed and the note, and establish who is on which
- Get the payoff figure from the servicer, good through a date
- Get a realistic sale figure, and put the two side by side
- Have the conversation with the co-signer, with those numbers in front of you rather than in the abstract
- Agree in writing who gets what, if they are on the deed
- Tell the title company the position at the start, so the authority and signature requirements are known early. Our page on Tulsa County title companies covers what they ask for
- After closing, get the payoff confirmation to the co-signer
The short version
A co-signer is on the note. Being on the deed is a different thing. Read both documents before you do anything, because whether they sign the deed and whether they receive proceeds both turn on it.
A sale that clears the loan releases them, which is usually what they want. A sale that does not clear it leaves them exposed to the shortfall, and that conversation has to happen before the sale rather than after.
Frequently asked questions
What is the difference between a co-signer and a co-owner?
A co-signer is on the note, which is the promise to repay, so they owe the money and the loan shows on their credit. A co-owner is on the deed, which is ownership. They are separate documents and somebody can be on one without the other.
Does my co-signer have to sign to sell the house?
If they are on the deed, yes, because whoever is on the deed has to sign to convey it. If they are only on the note, generally no, although the sale directly affects them.
How do I find out which one applies?
Read the deed, and separately read the note and the mortgage, noting who signed each. If the documents are missing, ask the servicer who is on the loan and pull the deed from the county records.
Does selling release the co-signer?
Where the sale pays the loan off in full, their liability on that loan ends with it. Get them the payoff confirmation afterwards, because their credit report takes a little time to catch up.
Does the co-signer get any of the money?
Only if they are on the deed. Somebody on the note alone does not receive sale proceeds. Where they are on the deed, agree the split in writing before closing rather than at it.
What if the house sells for less than we owe?
Somebody still owes the difference and that includes the co-signer. You cannot sell out of a shortfall without the lender's agreement, so get the payoff figure and a realistic sale figure and talk to the servicer before anything else.
Can I remove a co-signer without selling?
Refinancing into your own name is the usual route if you can qualify. Some loans have a release of liability mechanism, which is a question for the servicer, and the answer is frequently no.
My parent co-signed years ago and wants out. Is that reasonable?
Entirely. Carrying a loan on a house you do not own, years after everybody expected a refinance, is a common and unfair position, and asking for a timetable is reasonable.
What if the co-signer has died?
Their position depends on whether they were on the deed as well as the note, and if they were on the deed, on how title was held. That turns a loan question into an estate question, so read the deed first and take advice.
Can we just take their name off the deed?
If somebody is on the deed, removing them is a transfer and needs doing properly, not with an informal document. It also does nothing about their position on the note, which is the part people usually actually want removed.
What should I tell the title company?
The position at the start: who is on the deed, who is on the note, and whether everybody is cooperating. Signature and authority requirements are far easier to deal with early.
Do you buy in this situation?
Yes, and the first thing we do is establish who is on the deed and what the payoff is, because those two facts decide whether a sale is even possible at the price the house will fetch.
We buy houses, so read the last answer knowing that, and note this article sets out refinancing and release of liability as routes that do not involve us. We are not attorneys or lenders. Whether a loan can be assumed, whether a borrower can be released and what happens on a shortfall are matters for your servicer and a lawyer, and the answer depends on documents we have not seen.