What is a “short sale”? A short sale happens when the lender has shorted on a mortgage, meaning the lender accepts less than the total amount that is due. To avoid going through a foreclosure, a lender will sanction a short sale by letting a buyer purchase the home for less than the mortgage balance while the home is in pre-foreclosure stage.
Below is a sample set of steps for a short sale:
- Seller signs the listing agreement with a real estate agent subject to selling as a short sale with third party approval.
- The agent finds a buyer who makes an offer for less than the amount of the mortgage.
- Seller accepts the potential buyer’s purchase offer.
- Seller’s lender accepts the potential buyer’s offer.
- Transaction close when the buyer delivers the funds, the lender releases the lien and the seller delivers the deed.
Qualifications for a Short Sale:
- Home’s market value has dropped.
- Mortgage is in or near default status.
- Seller has fallen on hard times.
- Seller has no assets.
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