What is a Short Sale? Well, No matter what you’ve heard, the bottom line is: Buying or Selling a short sale home is a complicated process. One common misconception is that lenders just want to be rid of the property and will move quickly to get as much money back as possible. In fact, very few short sales are “short”.  Short Sales can be a lengthy process; they can take anywhere from 30 days to 6+ months.

Note: If the homeowner is in the Foreclosure process (and/or have a Property Foreclosure sale date set,  you in some cases have to make the sale happen before your Foreclosure sale date, so make sure you are working with a company that know how to handle these cases.

So, Before you jump to sell your house as a short sale,  you need to understand how the short sale process works.

What Is a Short Sale?

Understanding a short sale: A sale of a real estate property for which the lender is willing to accept less than the amount still owed on the mortgage.

For a Sale to be approved as short sale, these two things must be true:

1. 1. The homeowner must be extremely behind on mortgage payments and they simply just can’t catch up
   2. The property is worth less than the remaining balance on the mortgage.
   3. The Homeowner is in Financial hardship.

Short Sale

A short sale occurs when a homeowner in financial hardship and is in extremely behind on their mortgage payments, and if  the property is less than the amount the homeowners owes to the lender, then they may apply to the lender(s). The once applied, the process will be reviewed and approved by the lender.

Once the process has been approved by the lender(s), The Homeowner will receive an approval letter with all the terms. These terms will have the closing date, real estate commission, closing costs, and in most cases lender of the original mortgage gets all of the proceeds of the sale, and either forgives the difference or gets a deficiency judgment, which requires the original borrower to pay what’s left over.

Because everything is dependent on the lender, the short sale process can be lengthy and unpredictable—even if the homeowner and the potential buyer agree on terms. In most cases the Sellers go with ALL CASH BUYERS, and that are willing to wait the long process of the short sale. Additionally the Buyer must also cooperate with the lenders and summit requested documents to the lender in a timely manner.

How Does a Short Sale Work?

If you’re wondering what the standard steps are that typically happen as part of the short sale process, look no further.

Step 1: The homeowner starts by reaching out to a licensed real estate agent to list the property for sale on the local MLS (multiple listing service)  as a short sale. At this point, they homeowner will start by submitting  a short sale package to their lender. (In most cases the lender wants a fully executed sales and purchase contract summited with the short sale package) Note: The Sales and Purchase contract, and closing costs, repairs,  are  subject to the lender’s approval and is not final until then—even if both the seller and the buyer agree on the terms.

Step 2: The lender reviews the sales and purchase contract and the short sale package, and the closing statements,  and could then respond in a variety of ways. They could  ask for more supporting documents by the seller and or the buyer, they could reject the offer, counter the offer, , or they just might approve the offer.

Step 3: Once the offer by the lender is received by the seller it is  presented to the potential buyer, the contract will either stay the same or the buyer will choose to except or reject the lender’s terms.

Step 5: If the contract is approved, the lender will issue an Approval letter and it’s time for a Real Estate Closing! The Property is transferred to the new buyer. The lender receives all proceeds from the sale of the property and releases the original homeowner from their mortgage loan—even though the full mortgage balance was not paid off by the proceeds.