Understanding Short Sales

One of the most popular options for avoiding or postponing foreclosure is the Short Sale.

A short sale is when the property owner owes more on their mortgage than the market value of the home and is asking the bank to accept a short payoff of the loan.

Short sales provide homeowners that who are struggling with their mortgage payments the option of selling their home to avoid or postpone foreclosure proceedings.

However, as with any real estate transaction there are both benefits and negatives that need to be considered before moving forward with a short sale of your property.

Let’s take a look at reasons why a short sale may or may not be the right option for your situation:

Benefits of Short Sale

As we mentioned above, a short sale provides homeowners with one option to avoid foreclosure and provide relief if they are struggling to pay their mortgage. It can also be beneficial to your bank or lender, who can save on the costs associated with foreclosing on the property.  

Short sales are most often approved during the pre-foreclosure period. Typically, the pre-foreclosure occurs if a homeowner is more than 90 days late their mortgage payments and the lender has begun the foreclosure process. During this period, the homeowner still legally owns the property and has much more control over the sale of the property. Conducting a short sale during this period helps homeowners avoid the process and stigma of a foreclosure, which is an important issue for many.

Short sales also give homeowners more control over the sales process. While the lender must still approve the final offer and sale, the seller can, amongst other things, have the opportunity to hire the real estate agent of their choice and control other aspects of the sales process like the showing schedule.

A short sale is usually also less damaging financially. While your credit score will still drop, (typically between 50-200 points depending on your situation), this impact is less damaging than if you have a foreclosure on your record. Additionally, because the impact is less severe you are typically able to purchase your next home in less time than you would be able to if your home was foreclosed on.

Short Sale Negatives

In some situations a short sale may not be an ideal situation for homeowners that are unable to stay current with their mortgage payments.

While a short sale will not impact your credit as severely, it will still have an effect. If you are behind on your mortgage payments, your credit report will likely still show derogatory marks for missed payments.  These marks may remain on your report for up to 7 years.

Short sales are also a tedious process and require a large amount of paperwork to be completed. A lender may request personal records such as bank account statements, a list of assets and liabilities and tax returns. The amount of paperwork that is required may deter some from proceeding with the sale of their home.

Finally, short sales can take a long time to complete. Banks are notoriously slow at approving short sales, which means it is not an ideal option for someone looking to move on quickly. Additionally, any sell offer is dependent on approval from your lender, which takes control of the sale completely out of the homeowners hands.


Ultimately, a short sale can be an ideal way to get out from underneath an overwhelming mortgage and avoid foreclosure. As long as you’re able to deal with the impact on your credit report and are willing to wait for your lender to make a decision, it is certainly an option that could be in your best interests.

As one of the leading real estate and foreclosure defense firms in the California, our attorneys have the experience and knowledge to evaluate your situation and advise you on whether a short sale is in your best interests. Our attorneys also understand what it takes to submit a successful short sale package and are eager to answer any questions you may have. To schedule a FREE consultation with one of our attorneys please contact our firm at (888) 417-1080.

RA & Associates, APC
1 (888) 417-1080
[email protected]
505 N. Brand Blvd.
Glendale, CA 91203

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