Short sales
Owe more than your home is worth? A short sale may help.
I've completed hundreds of short sales. I'll explain how lender approval works, what to expect, and whether it's the right path for you.
What a short sale is.
When a home is worth less than the mortgage balance plus the cost of selling, it has negative equity. A short sale lets you sell anyway, for the market price, if your lender agrees to accept less than the full payoff.
The lender has to approve the sale price, the buyer's offer, and the closing terms. That approval is the difference between a short sale and a regular listing.
A short sale may fit if
- You owe more than the home would sell for
- You need or want to move
- A hardship has made payments difficult, or soon will
- You'd rather sell on agreed terms than wait for foreclosure
How the process works.
Here's the usual order of events. I handle the lender communication and keep the sale moving at each step.
Timelines vary. Lender review often takes a few months after an offer is submitted, and files with a second lien can take longer.
- 1Review your situationYour loan balance, any second mortgage or HELOC, HOA dues, the home's likely sale price, and any notices you've received.
- 2Authorize me to talk with your lenderYour servicer will ask you to sign a third-party authorization so I can discuss the file on your behalf.
- 3List at a realistic priceThe price has to attract a buyer and hold up when the lender orders its own valuation.
- 4Accept an offer, subject to approvalThe purchase contract makes the sale contingent on lender approval, so you aren't committed to a shortfall the lender hasn't accepted.
- 5Submit the package and negotiateThe offer goes to the lender with the documents it requests. I follow up, respond to counteroffers, and work with any second lienholder.
- 6Approval and closingOnce the approval letter arrives, title and escrow close on the lender's terms and deadline.
Lenders and servicers
Recognize your lender?
Your servicer is the company you send payments to. Each has its own short-sale department, forms, and timelines, so that's where we start.
Not sure who services your loan? It's on your monthly statement.
Mr. Cooper is now part of Rocket Mortgage
Formerly PHH Mortgage
What has to be coordinated.
A short sale has more parties than a regular sale. Each one has to sign off.
Every lienholder
A second mortgage, HELOC, or HOA lien has to agree to its share. Each is a separate negotiation.
Lender valuation
The lender will order its own opinion of value. Pricing and comps are prepared with that in mind.
Your buyer
Short-sale buyers need to be willing to wait. I keep them informed so the contract holds together.
Title and escrow
Payoff figures, approval terms, and closing deadlines all have to line up on the settlement statement.
Other paths to consider.
A short sale is one option. It's worth comparing before you decide.
I'm a real estate agent, not an attorney or tax advisor. For questions about deficiencies, taxes, or credit, I'll point you to the right professional.
Selling at market price
If the home is worth more than you owe after costs, a regular listing may work.
Short sale
Sell for less than you owe, with your lender's approval.
Loan modification or repayment plan
If you want to keep the home, ask your servicer about options. A HUD-approved housing counselor can help at no cost.
Deed in lieu of foreclosure
Some lenders accept the property in place of foreclosure. Ask your servicer whether it's available.
Short-sale questions.
Do I have to be behind on payments?
No. Some lenders will consider a short sale while you're current, especially with a documented hardship. Others require a missed payment. Your lender decides.
How long does a short sale take?
It varies by lender and file. Approval commonly takes a few months after an offer is submitted, sometimes longer when there's a second lien.
Will a short sale stop a foreclosure?
Not by itself. A scheduled foreclosure sale can still go forward unless the lender agrees to postpone it. If you've received a notice, call me right away.
What about the remaining balance?
The approval letter states whether any balance remains. Ask an attorney about deficiency questions and a tax advisor about tax treatment. I can't give legal or tax advice.
Will it affect my credit?
Usually, yes. How it's reported depends on the lender. A HUD-approved housing counselor can explain how it compares with other options.
Is your lender list a list of past clients?
No. The lenders shown are institutions homeowners commonly ask about. They aren't partners or sponsors, and they don't endorse me.
Find out if a short sale fits.
Tell me a little about the home and the loan. Please don't send account numbers or documents here; I'll follow up personally.