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What Is a Short Sale?

A short sale means that a homeowner’s mortgage lender agrees to accept less than the homeowner owes on the mortgage loan, and agrees that this lesser amount will pay off the loan in full. This happens as a last-ditch effort to avoid foreclosure.

For a short sale to be approved by the lender, the homeowner must meet certain criteria and provide required documentation. The homeowner must prove that they cannot pay their mortgage due to economic hardship or distress, and this hardship must be documented.

The lender may consider a short sale even before the homeowner has defaulted on the loan (before they have gotten behind on their mortgage payments).

A short sale has many advantages for both the homeowner and the mortgage lender. The homeowner avoids having a foreclosure on their credit record, and eventually will be able to buy another home. Also, the homeowner can stay in their home during the foreclosure process.

From the lender’s point of view, a short sale is faster, easier, and less expensive than a foreclosure. So the lender is motivated to cooperate in the short sale.

Short sales have become more common in the past several years, and lenders are more willing to cooperate, because of the problems and costs that lenders face in foreclosing on mortgage loans.

In a short sale, before a home goes on the market, there are processes that must be followed and steps that must be taken by both the homeowners and their Realtor. Working together, they will create a package that will be submitted to the lender for approval. Once the paperwork has been submitted, the Realtor will negotiate the sale price with the lender. The lender will want to make sure the home is listed at the right price so it will sell.

Negotiating a short sale agreement with a lender is complicated and time-consuming, and time to negotiate a successful agreement and get the home sold is limited. The process should never even be attempted without a Realtor who is trained and experienced and knows exactly what he or she is doing. And it should never be attempted unless the homeowner is ready and willing to work with the Realtor.

Up | What Is a Short Sale? | Your Options | SFR Resource | Short Sales Vs Foreclosures | Short Sale Process | Short Sale Example | Hardships | Foreclosure Timeline | Loan Modification | Definition of Terms