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A short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property and the property owner cannot afford to repay the liens' full amounts, whereby the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt. Any unpaid balance owed to the creditors is known as a deficiency.^[1] Short sale agreements do not necessarily release borrowers from their obligations to repay any deficiencies of the loans, unless specifically agreed to between the parties. A short sale is often used as an alternative to foreclosure because it mitigates additional fees and costs to both the creditor and borrower; however both will often result in a negative credit report against the property owner.

Often creditors require the borrower to prove they have an economic or financial hardship preventing them from being able to pay the deficiency.

Creditors holding liens against real estate can include Primary Mortgages, Junior lien holders—such as second mortgages, Home Equity Lines of Credit HELOC lenders, Home Owners Association HOA (special assessment liens)—all of whom will need to approve individual applications for a short sale, should they be asked to take less than what is owed.

Most large creditors have special loss mitigation departments that evaluate borrowers' applications for short sale approval. Often creditors use pre-determined criteria for approving the borrowers and the terms of the sale of the properties. Part of this process typically includes the creditor(s) determining the current market value of the real estate by obtaining an independent evaluation of the property from an appraisal, a Broker Price Opinion (abbreviated BPO), or a Broker Opinion of Value (abbreviated BOV). One of the most important aspects for the borrower in this process is putting together a proper real estate short sale package. The package should be well organized along with a hardship letter telling the creditor why a short sale is needed.

Depending on each creditor's policy and the type of loan, creditors may accept applications from borrowers even if the borrower is not in default with their payments. Due to the overwhelming number of defaulting borrowers due to mortgage failures and other causes as part of the financial crisis of 2007–2011, many creditors have become adept at processing such short sales applications; however, it can still take several months for the process from start to finish, often requiring multiple levels of approval.

If you have had a financial hardship, an unexpected financial change, garnishments, or a change in your living situation that has impaired your ability to pay, you may qualify for a short sale. The approval process from your bank is normally 6-8 weeks. After the approval, if you have an offer already; it could be another 45 days. You may also qualify for a moving fee of up to $3k.

As a licensed professional, I would be happy to help you with all of your real estate needs. Please call or email me with any questions that you may have. 916-410-9727 Thank You!