What is a Short Sale?

Real Estate Agent with Samsel & Associates 0790808

A short sale is a home sale in which the home is financially distressed. The mortgage owed exceeds the market value of the home and we say that the home is "underwater" or "upside down." A short sale is NOT a foreclosure.Image

How does this happen?

First, a home is purchased in a high market, and especially when the home is purchased with a large percentage of the value being mortgaged. Imagine a $500,000 mortgage on a home you've purchased for $525,000.

Second, the home's value drops below the mortgage value. Imagine the $525,000 home's value dropping to $450,000 - certainly not unheard of in the past 8 years. Now the owner owes $500,000 but can't sell the property for more than $450,000.

What can you do?

You really have 3 choices:

  1. Sell at market value and accept the loss. bring a check to the closing. Protect your credit.
  2. Stay in the home and wait for the market to improve.
  3. Sell short. That means that your lender agrees to accept a lower pay off amount as payment in full. Affects your credit rating far less than a foreclosure. Forgiven debt may be considered income.

How do you get a Short Sale approved?

For a short sale to be approved, these four conditions must be true:

  1. Your mortgage must exceed value of home.
  2. You must have had a "hardship" since the purchase of the home - loss of job, business failure, divorce, death, etc.
  3. You must have a monthly shortcome  of income to repay the mortgage.
  4. You must be facing insolvency - the inability to repay the loan from other assets.

Is it really "Short?"

No, not usually. When a buyer makes an offer on an underwater home, not only does the homeowner have the option to negotiate, but so does the mortgage lender. This may take some time.

What do you do next?

If you're thinking of a short sale, you should contact your lender. You also will need a real estate agent to maneuver through the stages of a short sale.


For more information, please go to HallmarkVideos.com and select the video named "Short Sale Option." If there is anything Team Zuhl can do to help you with the sale of your home, please don't hesitate to call us!

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~ Wayne & Jean 

Union County, NJ - a great place to live and work!

If you're looking to buy or sell a property in Union County, call us at 908-917-4189 or email TeamZuhl@gmail.com.


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All opinions, information and data provided is deemed reliable but is subject to errors and omissions. Not intended to solicit other Brokers' clients. We cooperate with them fully. 


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Anita Clark
Coldwell Banker Access Realty ~ 478.960.8055 - Warner Robins, GA
Realtor - Homes for Sale in Warner Robins GA

Jean: Very clear and easy to understand short sale guide. I hope many who may need this type of assistance see your post and call you to help get them started with the process. I love the photo too!

Jul 11, 2014 09:22 PM #1
John Wiley
Fort Myers, FL
Lee County, FL, ECO Broker, GRI, SRES,GREEN,PSA

Wayne & Jean, very concise and understandable explanation of what is a short sale.

People who face a short sale should use an agent that is trained and has the experience to guide them through what can be a long and drawn out process.

Jul 11, 2014 09:31 PM #2
Nina Hollander
Coldwell Banker Realty - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

So many buyers still confuse short sales with foreclosed homes and don't understand how differently you have to negotiate on them. Great explanation.

Jul 11, 2014 10:09 PM #3
Amanda Christiansen
Christiansen Group Realty (260)704-0843 - Fort Wayne, IN
Christiansen Group Realty

This is a great explanation of a short sale v. a foreclosure.  They definitely are not the same.  On a side note, I wouldn't touch one with a 10 foot pole!  They're nightmares!

Jul 11, 2014 10:13 PM #4
Beth and Richard Witt
Long Island Cash Home Buyer - Huntington, NY
Long Island Cash Home Buyer 516-330-6940

This is an excellent post and I'm happy that it got the well deserved gold star!!!

Jul 11, 2014 10:52 PM #5
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

All you really have to know....?  CALL THE ZUHLS.....then, sit back and enjoy the deal

Jul 11, 2014 10:58 PM #6
Andrew Mooers | 207.532.6573
Northern Maine Real Estate-Aroostook County Broker

Everything will sell in time with right condition, rock bottom pricing. There is always, always a real estate market. Great short sale rehash that is needed, because so common out there in many markets. Maine is 44th lowest for foreclosure, short sale, repossession... (FSSR)

Jul 11, 2014 11:58 PM #7
Sybil Campbell
Long and Foster REALTORS® 5234 Monticello Ave Williamsburg, Virginia - Williamsburg, VA
REALTOR® ABR, SFR, SRES Williamsburg, Virginia

Wayne and Jean, thank you for the explanation of what a short sale is and how the process works.

Jul 12, 2014 12:51 AM #8
Bob Force (REALTOR®)
Weichert - McKenna & Vane - Mount Airy, MD
The FORCE in Maryland Real Estate

You covered it very well.

Short sale is when the market will not bring the price necessary to cover an existing mortage (and home equitity).  That is not a statement that say the seller is in anyway in arrears on the existing loan(s) against the house.

Jul 12, 2014 01:25 AM #9
Elizabeth Weintraub Sacramento Realtor Top 1%
RE/MAX Gold - Sacramento, CA
Put 40 years of experience to work for you

I have sold short sales in which the mortgage did not exceed the value of the home. You might wonder how that is possible, right? It is.

Jul 12, 2014 01:45 AM #10
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

The question for the ages but, ironically, I don't think it should be rushed however short it is. :

Jul 12, 2014 03:29 AM #11
Jeff Yeats

Wow! Learned some great stuff here. I'm a new agent and was unaware of some of the qualifications for short sale. I considered this post the most helpful for me yet! I am an investor myself and have people ask me often about investment opportunities. Now I am a little bit smarter :)

Jul 12, 2014 05:55 AM #12
Heidi Hovatter - Sonora & Twain Harte
Century 21 Wildwood - Selling Homes and Cabins in Tuolumne County - Sonora, CA
Heidi The Home Hunter

very informative post.  Many many seller have these questions.

Jul 12, 2014 07:03 AM #13
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

short sales are not short !  that is for sure.  You did a great job of explaining the basics.

Jul 12, 2014 12:25 PM #15
Debbie Reynolds
Platinum Properties - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent

Love the graphic as it says it all. Have a great weekend.

Jul 12, 2014 06:45 PM #16
JC Melvin - Commercial & Business Broker
JC Melvin - KW Southwest - Las Vegas, NV
The ONE Thing Workshop Trainer

Nice post. It is still mis-understood by many. Thnks,

JC in Vegas

Jul 13, 2014 12:53 AM #17
Sophia Lin
Intero Real Estate Services - Sunnyvale, CA
Sunnyvale CA Real Estate Specialist

Hello, well said! Even though I already know what a  short sale is you made it very clear to new readers thank you for be

Jul 13, 2014 03:58 AM #18
Marc McMaster
RE/MAX Centre Realty - State College, PA
Putting my clients before myself

I still believe that banks don't want to approve short sales and would rather the house go into foreclosure. 

Jul 13, 2014 09:42 AM #19
Shelly Hendry
Keller Williams Realty Cityside - Powder Springs, GA

The banks I've been working with are really dragging their feet lately. And most buyers seem to be understanding that the process is difficult at best. It's getting so that investors are the only ones with the ability to patient enough to wait it out. 

Jul 14, 2014 04:05 AM #20
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Wayne and Jean Marie Zuhl

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