Is A Short Sale for You?

Real Estate Broker/Owner with RE/MAX Home Experts

Is A Short Sale for You?

A short sale, in brief, is when the homeowner's market value is less than the amount owed on the mortgage when selling a property. Thus, the homeowner would not be able to clear the lien unless an agreement is reached wth the lender to accept less than the amount owed as "paid in full" to remove the lien.

So, the question remains, Is A Short Sale for You?

I am not a lawyer, so I must state that any personal advice should be obtained by consulting a real estate lawyer familiar with short sales, bankruptcies, and foreclosures.

Most people considering a short sale are delinquent on their mortgage payments. A short sale is simply an exit plan for the homeowner. It can be an alternative to a foreclosure or a deed in lieu of foreclosure. It is widely believed that a short sale has a less negative impact on the borrower, thus enabling the borrower to re-establish himself/herself financially. Below are some examples of situations I've experienced when borrower's elected to try a short sale:

  • Delinquent on mortgage payments and unable to obtain a loan modification or bring the loan current
  • In the beginning stages of the foreclosure process (a complaint was filed)
  • In the latter stages of the foreclosure process (judgment in foreclosure - sheriff sale date scheduled)
  • Relocating and unable to sell home and pay off note due to property value depreciation
  • Divorce - unable to sell home and clear mortgage balance
  • Death of borrower or financial contributor to household income
  • Incarceration - of borrower or financial contributor (note - lenders will not approve short sale if borrower is charged in real estate fraud or schemes)
  • Loss of job
  • Strategic Sale - value drops so low it does not make financial sense for borrower to stay in property (obviously, most banks will not approve a short sale for this reason. A financial hardship must be demonstrated, however it may depend on the area the house resides and if that market area is in a seriously declining market. Some lenders may just want o take what they can get in that situation.

There are a number of benefits for choosing a short sale over other options. Some of those are:

  • No outstanding balance owed by you in form of deficiency judgment or other pay back note (not a guaranty; must read short sale agreement to ensure this)
  • Peace of mind - Many homeowners feel better about a proactive approach to the situation and lenders actually prefer it
  • Helps adjust the housing market and better public perception than a foreclosure
  • Possible tax benefit (check with tax attorney or CPA)
  • Less harmful to the borrower's credit - much easier to repair credit from a short sale than other alternatives


If you are thinking of walking away from the mortgage of your property or a deed in lieu of foreclosure, you may want to consider a short sale. At least schedule a consultation with an agent experienced in short sales before making your final decision.


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John Benson

Broker/Owner - Philadelphia Real Estate
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