Short Answer
A short sale occurs when you sell your home for less than the amount you owe on your mortgage, and the lender agrees to accept the sale proceeds as full payment of the debt. Short sales apply when you are unable to make mortgage payments, owe more than the home is worth, and have a financial hardship. The lender must approve the short sale, which can take 60 to 120 days. A short sale is less damaging to your credit than a foreclosure but still has negative credit implications.
A short sale is a negotiation between you, your lender, and a potential buyer. You must demonstrate financial hardship, such as job loss, medical bills, divorce, or reduced income, to qualify. The process requires you to submit a hardship letter, financial statements, tax returns, bank statements, and a purchase offer to your lender for approval. The lender will order a Broker Price Opinion or appraisal to determine if the offer price is reasonable. If approved, the lender accepts the sale proceeds and forgives the remaining debt, though the forgiven amount may be considered taxable income. Short sales take longer than traditional sales because of the lender review process. Buyers need patience, and not all offers will be accepted. After a short sale, your credit score will be impacted, but typically less severely than after a foreclosure. You may be able to qualify for a new mortgage sooner after a short sale than after a foreclosure. Consult with a tax professional about potential tax implications.
Bob's Advice
Redfin Senior Agent · AI Certified Agent
A short sale is not an easy process, but it can be a way out when you are underwater on your mortgage and cannot continue making payments. I have helped homeowners navigate short sales successfully. The key is working with an agent who has experience with short sales and can manage the lender negotiation process. If you are considering a short sale, let us talk about your situation. I will be honest with you about whether it is the right option and what you can expect throughout the process.
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