Short Sales / Foreclosures

Short Sale Basics
A short sale is a sales transaction in which the seller’s mortgage lender agrees to accept a discounted payoff to release an existing mortgage. The pros and cons should be weighed carefully before sellers move forward with this process. The short sale process can be long and requires patience. The seller can no longer afford payments and is typically dealing with a hardship, such as:

  • Loss of employment
  • Inability to work due to medical conditions
  • Disputes with co-owner, Divorce
  • Job transfer to another state
  • Negative equity

As a result of hardship, the seller owes more to the bank than the mortgaged property is actually worth. In this situation, the only way for that person to make any money back is by short sale. Usually, a short sale occurs to avoid foreclosure, or losing the house to the bank.

Buying a Short Sale Property
Do your research. Ask your agent for a list of comparable sales before writing a short sale offer. This is typically somewhat close to market value. Ruby Davidian has the short sale experience and knowledge that will expedite your transaction and protect your interests.

Short sales may be priced below comparable sales to encourage multiple offers. After the seller accepts the offer, their agent will send these items to the bank:

  • Listing Agreement
  • Executed purchase offer
  • Buyer’s preapproval letter
  • Copy of earnest money check
  • Seller’s short sale package

If the package is incomplete, the process will be delayed. Some banks may even shred the package, so make sure your package is complete.

Keep in mind that the lender will not always accept your offer, even if the seller accepts it.  The deal is sealed after the lender is on board and accepts your offer.

Selling Your Home through a Short Sale
For owners who can no longer afford to make mortgage payments, the best alternative to bankruptcy or foreclosure is a short sale. Some pros and cons are:


  • Eliminates negative equity
  • You might qualify for a new mortgage sooner than if you foreclose or declare bankruptcy
  • You can repair your finances by reducing housing payments


  • Puts a dent in your credit history and score
  • Hurts your future financing options on real estate for at least 2 years
  • Gives lenders the option to purse the “deficiency balance” after the sale
  • You may still have to pay taxes on the amount of forgiven debt

As a seller, you must prepare a financial package to submit to the short sale bank. Each bank has its own guidelines, but the basic procedure is similar from bank to bank. The package you put together includes items such as:

  • Letter of authorization (this lets your agent speak to the bank)
  • HUD-1 or preliminary net sheet
  • Completed financial statement
  • Seller’s hardship letter
  • 2 years of tax returns
  • 2 years of W-2s
  • Recent payroll stubs
  • Last 2 months of bank statements
  • Comparative market analysis or list of recent comparable sales


Check out this great Short Sale Infographic to help you understand the short sale process:

Credit Sesame Short Sale final

Debt Management –