Understanding Short Sales: Debunking the Myths and Exploring the Process

One of the most misunderstood terms in real estate is the Short Sale. Many people assume it’s something that happens quickly—like a fire sale where properties are sold at a steep discount and transactions close in record time. But the truth is quite the opposite. In reality, short sales are often some of the longest real estate transactions.

So, what exactly is a short sale?

A short sale occurs when a homeowner sells their property for less than what they owe on their mortgage, and their lender agrees to accept the reduced payoff amount. In other words, the lender agrees to sell the property short of the total mortgage balance.

Why Do Short Sales Happen?

Short sales are typically pursued as an alternative to foreclosure. When homeowners face financial hardship and can no longer keep up with their mortgage payments, a short sale can offer a less damaging outcome for both the lender and the homeowner.

For lenders, short sales are often more financially favorable than foreclosures, as they allow the bank to recoup more of the outstanding balance. For homeowners, a short sale generally has a smaller impact on their credit score compared to a foreclosure, making it easier to recover financially and purchase a home in the future.

The Requirements for a Short Sale

For a short sale to occur, two primary conditions are usually present:

1. The homeowner is behind on their mortgage payments and lacks the financial ability to catch up.

2. The property’s market value has dropped below the remaining balance owed on the mortgage.

Why Aren’t Short Sales…Short?

The term short sale refers to the financial aspect, not the timeline. In fact, short sales are notoriously slow-moving transactions. The primary reason? Lender approval.

After the seller accepts an offer from a buyer, the lender must review and approve the deal. This process can take anywhere from 30 to 90+ days, depending on the lender's internal procedures and workload.

During this period, the lender will:

• Conduct an independent valuation of the property.

• Review the financial details of the transaction.

• Calculate the costs, payoffs, and potential losses.

• Present the offer to any investor(s) holding the mortgage note.

Once the review is complete, the lender may accept, reject, or counter the buyer’s offer. If accepted, the seller is released from the mortgage loan upon closing.

Navigating a Short Sale with an Expert

As a Certified Distressed Property Expert (CDPE), I’ve guided many homeowners through the complexities of the short sale process. I understand that being in a position where you can no longer afford your mortgage payments is incredibly stressful, but it’s important to know that there is a way out.

A Silver Lining in Today’s Market

In recent years, home values have seen significant increases. If you previously thought you were underwater on your mortgage, there’s a chance that’s no longer the case. We recently helped a family facing foreclosure not only avoid losing their home but also walk away from the sale with over $50,000 in proceeds.

Take Action Today

If you’re struggling with mortgage payments, facing foreclosure, or simply have questions about the short sale process, don’t wait. Reach out to us today, and let’s discuss how we can help you navigate this challenging situation and find a solution that works for you.

Your home, your peace of mind, and your financial future are worth it. Let’s work together to create a positive outcome.