Short Sale 101

Short Sale questions answered for homeowners with the toughest housing problem……Foreclosure



What is a Short Sale?

 Answer:A short sale is something your lender or your mortgage holder will use to discount your mortgage balance owed.  This will help to liquidate your house by covering a portion of the mortgage balance owed.  This will also assist you and your lender in avoiding post foreclosure and its effects.  With the rise of foreclosures, home values are sinking fast and lenders will discount your home mortgage balance or the amount you owe on your principal to avoid the cost of foreclosure.

 Why would a lender discount a mortgage?

 Answer: Lenders realize that once they take a house from the homeowner for non-payment or repossess a home for their mortgage or deed of trust, things get worse for them.  Foreclosure or Bank Repos scream deal and future buyers for that home will want a bargain.  Everyone knows that a foreclosure property should sell for less than other houses that are owned by private sellers on the open market.  So to avoid holding onto a property for six-eight months a lender will usually prefer to deal with a homeowner and their buyer to save at least $20,000, better known as take back fees.  Taking a hit early means the lender can put the money to use faster and start earning money again.

 How do I know if my house qualifies for a short sale?

 Answer:Usually if you are at least 30 days behind on your mortgage payments, your lender is willing to talk about taking a discount to get a bad loan off their books.  In addition to that, you have to be over financed, meaning after you pay all of your bills you don’t have any money left over for gas, food and other things that will keep you from making your payments.  These are just the basic qualifications.  You should contact us immediately to see if you qualify for a short sale at 517-853-7037.

 If my lender accepts less than I owe on my home, will I be responsible for the difference?

 Answer: Sometimes a lender will try to come after a homeowner for the balance that is left over after they accept the discounted payoff.  If they do, this is known as a deficiency judgment. If they waive their rights to a judgment, they will issue something similar to a 1099, which may become taxable. 

 Will a short sale affect my credit?

 Answer:Yes.  Your credit report may show that your mortgage has been “paid off, less than full," this will let future creditors know that you didn’t keep your obligation to pay off your mortgage.  However, it  does show you made a responsible choice and attempted to get the lender a majority of their money.  It also shows that you had integrity.  One thing you must realize, is that the sooner you start the short sale process and sell your home the better.  The longer you wait the more delinquent marks you will have on your credit report.  So if you wait until two weeks before the auction of your house and it takes another four months to work out the short sale, your credit will be effected in a negative manner.  You will continue to receive hits showing your payments as 30, 60, 90, and 120+ days past due.  These marks along with the account showing "paid off, less than full" can really hurt your credit.  A lender may issue a ‘Notice of Default’ as early on in the process as a homeowner being 30 days past due on their mortgage.  Once the Notice of Default has been issued and a foreclosure date has been set, the chances of a homeowner being able to obtain financing in the future decreases dramatically.  Most lenders require a homeowner to wait three years before they are eligible for financing to purchase another home.  Your only other option during this three year period would be to save up a cash down payment of 5 – 10% and find a seller willing to offer you owner financing.

 How much can I get if I short sale my home?

 Answer:Lenders do not want you to receive any money as a result of them taking a discount.  This makes sense, since they are the ones taking a loss.  Should there be any proceeds from the closing, the lender will have you sign a waiver stating that you, the homeowner, will not receive any funds from the closing.  Some lenders will agree to pay you $1,000 for moving expenses and to put down on a new place to live, but most will not allow you to receive any money. 

 My lender sent a letter through their attorney, do I have to leave my house now, and is that a foreclosure?

 Answer: No, the letter from your lender’s attorney is to put you on notice that you need to catch up on your mortgage payments within a specified amount of time.  This is known as a ‘Notice of Default’ or ‘Notice of Trustee Sale’. The Foreclosure Auction Sale date, also known as a Sheriff’s Sale date, is the last day in which you own the property.  Only after the sales date or auction date, when the redemption period expires, then are you forced to move from your house.  A foreclosure has officially taken place once the Sheriff’s Sale or Auction Sale has been completed.  Some states have a redemption period after the foreclosure auction date, this period varies from six months to one year in the state of Michigan.

 Is a Short Sale, public information?

 Answer:The only parties that know about your property in a short sale transaction are the buyer, your lender and your realtor. You can walk away from your house with your head up, knowing you sold your house without your lender taking the house back.

 What can prevent a short sale?

 Answer: The following things can prevent a short sale; your financial picture, the offer, the value of the home, and/or the amount the lender can expect to make in the sale.  The lender will review each of these items in order to determine whether or not to pursue the short sale of your home.

 I don’t know what the proper paperwork is to start the short sale, now what?

 Answer: First you must contact us we will then contact your lender to obtain the proper document package.  Without a complete package your file will NOT be touched by the Lender.  Once you have the package complete, we will assist you in getting the file to the right people so we can get your house sold fast. 

 If you have any more questions about short sales, feel free to email us at or by calling 517-853-7037