top of page
  • The Biggest News Jason Rosenberg

Demystifying the Short Sale: How It Works and What It Means for You

When it comes to buying or selling a home, you may have come across the term "short sale" and wondered what it means. In the world of real estate, short sales can provide opportunities for both buyers and sellers, but they also come with their own set of complexities. In this blog post, we'll explore what a short sale is, how it works, and the pros and cons for both parties involved.

What is a Short Sale?

A short sale is a real estate transaction where a homeowner sells their property for less than the outstanding balance of the mortgage. This often occurs when the homeowner is facing financial hardship and can no longer make mortgage payments, or when the property's market value has decreased, making it impossible to sell the home for an amount sufficient to cover the outstanding mortgage balance.

The Process of a Short Sale

  1. Homeowner's Decision: The short sale process begins when a homeowner realizes they can no longer afford their mortgage payments and decides to sell the property as a short sale. The homeowner must demonstrate financial hardship and prove that the property's market value has declined.

  2. Lender Approval: The homeowner then contacts their mortgage lender to request a short sale. The lender will review the homeowner's financial situation, the property's market value, and other relevant factors to determine if they will approve the short sale. Approval is at the lender's discretion and is not guaranteed.

  3. Listing the Property: If the lender approves the short sale, the homeowner will list the property for sale, typically with the help of a real estate agent who is experienced in short sales. The listing price will be determined based on the current market value and lender approval.

  4. Buyer's Offer: Interested buyers will submit offers on the property. The seller will then choose the best offer and submit it to the lender for approval.

  5. Lender Approval of Offer: The lender will review the buyer's offer, including the proposed purchase price and the buyer's financial qualifications. If the lender approves the offer, the short sale can proceed to closing.

  6. Closing the Sale: The buyer and seller will close the transaction, with the proceeds from the sale going directly to the lender. The lender will then release the lien on the property, allowing the new owner to take possession.

Pros and Cons for Buyers and Sellers

Pros for Buyers:

  1. Potential Bargain: Buyers may be able to purchase a property at a lower price than a traditional sale since the lender is motivated to recoup some of the outstanding mortgage balance.

  2. Less Competition: Short sales tend to have less competition, as not all buyers are willing to navigate the complexities of the short sale process.

Cons for Buyers:

  1. Longer Process: The short sale process can be lengthy, as it requires multiple layers of approval from the lender.

  2. Uncertainty: The lender may reject the buyer's offer or counter with a higher price, adding to the uncertainty of the transaction.

  3. Property Condition: Short sale properties are often sold "as-is," meaning the buyer may need to invest in repairs or improvements.

Pros for Sellers:

  1. Avoiding Foreclosure: By selling the property through a short sale, the homeowner can avoid the negative financial and credit implications of foreclosure.

  2. Debt Forgiveness: In some cases, the lender may forgive the remaining mortgage debt, relieving the homeowner of further financial obligations.

Cons for Sellers:

  1. Credit Impact: While less severe than foreclosure, a short sale can still negatively impact the seller's credit score.

  2. Tax Consequences: Sellers may face tax liabilities due to the forgiven debt, which could be considered taxable income.


A short sale can be a viable option for homeowners facing financial hardship


bottom of page