What is a Short Sale?

A short sale is when a mortgage lender agrees to accept a mortgage payoff in an amount that is less than what is owed in order to facilitate a sale of the property by a financially distressed owner. 

A short sale has to be approved in advance by the mortgage lender. There are two critical factors most lenders will consider when approving a short sale: 

*The home is preferred to be worth less than what the homeowner currently owes on it. The lender will want to review recent sales of comparable properties to make sure this is the case. 

*Preferably, the seller can prove financial hardship. They should show that they don't have the income or assets to pay back the rest of the outstanding balance on their mortgage.

While a seller's credit will take a negative hit as a result of a short sale, it is often less than a foreclosure.  But with some patience and work, all parties can get some sort of benefit in a short sale. In the end, a short sale is about avoiding worse outcomes. 

Short sales tend to be very time-consuming and are a complicated process, so be prepared for lots of paperwork. Because of their complex and lengthy nature, short sales do fall through on a regular basis. To reduce the odds that your short sale falls through, here is a broad-strokes overview of what you should get together.

    *A hardship letter explaining why you're not able to continue making payments on your loan.

    *Proof of income and assets, including tax and bank statements.

    *A comparative market analysis including comparable properties that have sold in the past six months.

    *A list of liens.

The seller should be able to prove they have no other option, show some sort of hardship, and prove they can't keep making mortgage payments and will eventually default.

If you are working with a Realtor who is familiar with the short sale process, they will be able to guide you through all of the steps to give you a better chance of being successful with your short sale.

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