Putting the Real in Real Estate!

Short Sale - FAQ's


What is a short sale and other frequently asked questions.

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What is a short sale?

When the lender agrees to accept less than the payoff to enable the sale of the property.

What are the requirements? 

  • Hardship (such as a job loss, health issues, etc.)
  • The sales value is less than the amount of the loans plus encumbrances plus selling costs
  • A delinquent or defaulted loan.

What is the purpose of a short sale? 

  • To facilitate the sale of the property to avoid foreclosure.

How does this benefit the lender?

  • It reduces the proportion of "bad debt" for which they are accountable".
  • It avoids high foreclosure costs.
  • It keeps the home occupied.

How does this benefit the Seller/Borrower:

  • They can avoid foreclosure and maintain a better credit score.
    • Missed payments: credit score is affected by approximately 30 - 100+ pts.
    • Foreclosure affects credit score by approximately 140 to 300+ pts.
  • Save money. The seller/borrower can stay in the home "mortgage free" during the process.

When is a short sale more likely?

  • When the seller can show legitimate hardship.
  • When the property is sellable.
  • When the same lender holds both the primary and secondary mortgage.
  • When the seller is willing to provide allthe documentation requested.
  • When the financial application can show insolvency.

When is a short sale less likely?

  • When the seller cannot show hardship.
  • When the seller is current on all loans and does not anticipate any missed payments.
  • When the seller is in Chapter 7 or Chapter 13 bankruptcy.
  • When the seller has recently completed a refinance with cash out.
  • When the seller is unable or unwilling to provide all documentation requested.
  • When there are liens and/or judgements with third parties.

Are there tax ramifications?

There may be.  You need to discuss this with your CPA or Attorney.

How long does a short sale take?

Short sales are not a quick process. Generally they cannot be started until there is an offer on the property. 

Is there anything that can be done to speed up the process?  Yes.

  • Make sure that the package is complete when it is submitted to the lender.
  • Having a contact within the lending institution is an enormous aid in the process.
  • Use a Certified Short-Sale Professional to help you pull it all together.
Brett Deutsch, GRI, ABR, CSP