Helping Neighbors In Need

A short sale is a sale of real estate where the proceeds from the sale fall “short” of paying the balance owed on the loan. Lenders must give their consent for a short sale to take place. Short sales have become prevalent as more and more homeowners need to move but find themselves owing more on their homes than they are currently worth.

Why would a lender consent to a short sale and accept less than is owed on a property? Under normal circumstances they would not, but if the homeowner is unable to make their mortgage payments a short sale typically allows the lender to recoup more of their investment than they would by going through a lengthy foreclosure process. Lenders, therefore, often consider short sales their preferred method of disposing of non-performing assets and are usually very amenable to working with experienced short sale specialists.

Process

In a short sale, the homeowner typically offers the property for sale through a real estate agent (so that they can demonstrate that the property has been well marketed) and accepts a contract to sell contingent upon the lender’s approval of the contract. The homeowner’s representative then submits a “short sale package” (containing the purchase offer, financials, and a letter explaining their need to sell) to the lender for the lender’s approval of the sale. The lender has the option of approving the sale at the offered price or countering with terms that they would find acceptable.

Note: Short sales can be very complex (especially if there is more than one loan on a property), take much more time to complete than typical real estate transactions (often between 3 and 6 months), and require agents experienced with these types of transactions to succeed. Fortunately for the homeowner, in most short sale transactions the lender pays for agent’s fee, so there is no reason not to select the best agent available.

Credit Implications

Short sales are a type of “settlement of a debt”, and they will adversely affect a person's credit (scores can be lowered between 45 and 125 points due to a short sale), though the negative impact is almost always less than a foreclosure. Depending upon other credit information, it is usually possible to obtain another mortgage 1–3 years after a short sale (or less if the borrower is current at the time of the sale. See the "Frequent Questions" tab for more information.

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