The short sale process step-by-step

If you are behind on your mortgage payments, the short-sale process can help you avoid foreclosure and be free from your mortgage debt.

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short sale processIf you are behind on your mortgage payments and want to sell your home to stop foreclosure proceedings, a short sale might be the solution to your dilemma. The short-sale process can help you avoid foreclosure and get out from under your mountain of debt. A short sale is when your lender agrees to accept a payoff that is less than you owe on your mortgage.

List your home

The first step is to list your home on the market. Most lenders require that you attempt to sell your home in a traditional sale before you go through the short-sale process. Select a real estate agent who is experienced in selling homes in short sales. You need to make sure your home is in optimal condition for potential buyers, so you should make any minor repairs that you can afford as this will ensure your home has the best curb appeal possible.

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Approach your lender

After your home remains on the market for the time your lender requires, you may request to sell your home through a short sale. Your lender has to agree to this request as it will lose money on the sale. The actual process varies by lender, but most companies require that you make a formal request in the form of an application that must be completed and submitted to them.

You will also have to compose a hardship letter. This document explains why you need a short sale, which is also referred to as a pre-foreclosure sale. You need to detail why you can no longer afford your mortgage payments and the efforts you've made attempting to sell through a traditional listing. Your lender will also ask for a list of financial documents to prove your hardship and why a short sale is the only way you can avoid foreclosure.

Sell your home

Some buyers feel homes that sell in pre-foreclosure offer better deals, so don't be surprised if interest in your home increases. If you receive an offer, present it to your lender. It will evaluate the offer and see how it compares to the market value of the home. If the lender agrees to the sale, the selling process is similar to a traditional home sale. The lender can also make a counter offer, and the prospective buyer can either accept this or reject it and end the negotiations. A lender can also reject an offer outright. If this occurs, the search for a buyer starts over again.

Selling a home via a short sale can be stressful. It is important that you research the option thoroughly. Once you understand how things work, the short-sale process will be easier to navigate, and if successful, will bring your financial hardship to an end. Reply! can help you research your home values and find a real estate agent who specializes in short sales.

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About the Author

Larque Goodson is an real estate editor at Reply! She has 20 years of experience in photojournalism and marketing. To share ideas about real estate, find her on Google+.