Short Sales

Short Sales may take a while but can be worth the wait for a buyer.  I’m experienced in short sales and can help you purchase OR sell your home if you need to sell as a short sale.  A ‘short sale’ is where the lender allows a seller to sell the home for less than what is owed on the mortgage.  Buyers can sometimes save tens of thousands of dollars if they are patient.

Sellers do not walk away with any money but does not have a foreclosure.  Short sales can affect your credit score but not as badly as a foreclosure and can be quite a stress-relief when completed and the Seller can move on with their life.  Short Sale sellers must meet certain criteria with the bank and show some kind of hardship – loss of job, divorce, illness and other reasons may make it difficult for a Seller to get their home sold and the bank will require documentation from a Seller to approve a short sale.

The Debt Relief Act (allowing the Seller to not have to pay back any deficiency impacting their Federal taxes) has been extended through 2013.   IF your home will not sell for more than you owe – this is the year to make a short sale happen.  We were lucky in 2012 to have Congress extend this debt relief act.  It may not happen again!


  1. Seller signs a listing agreement with Janet Giles (lender will later ask for the listing agreement)
  2. Your agent finds a buyer who makes an offer for less than the amount of the mortgage(s) or liens on the real estate
  3. Seller accepts the buyers offer but this offer that is less than the payoff amount is SUBJECT to the lenders approval
  4. Lender will ask for certain documents to give their approval which may include the following:
    • Last 2 pay stubs
    • Hardship letter (seller writes a letter explaining that seller cannot get the home sold i.e. the market value has significantly dropped or the seller has fallen on hard times and cannot continue to pay as a result of divorce, unemployment, medical emergency, illness, bankruptcy, death
    • Last two months bank statements
    • Last two years federal tax returns
    • Listing agreement
    • Financial statement – lender may provide you with this form
    • Copy of purchase agreement – signed by all parties – having address the same on every page and repeated on every page – all pages initialed by buyers and sellers – allow enough time for lender approval and enough time to close or an amendment may slow up the process if the purchase agreement expires prior to the working out the short sale – attach the proof of funds/preapproval letter for the buyer – attach a copy of the earnest money check
    • Proposed HUD (Settlement Statement) – this can be prepared by a lender. Sometimes this is difficult esp. with the new HUD (after Jan 1, 2010) but it will be an estimated HUD
  5. Seller’s lender reviews all documents and approves the buyer’s purchase agreement
  6. Normal steps to closing then happens such as inspections, etc. and closing happens

The purpose of the short sale is to get the home sold without it going to foreclosure. The lender will require a financial statement to find out if there are assets of the seller that could allow the seller to pay. If the lender can prove that the seller could pay then the lender may ask for a promissory note to be signed to repay the unsecured balance. The lender could also issue the seller a 1099 for the amount of the debt that was forgiven (although lately this has been rare). The credit report WILL BE affected but not as much as having a foreclosure. Contact an attorney for legal advice. (Janet Giles often uses a third party negotiator with a law firm working on short sales as needed!)