Short Sale

Don’t we all want a short sale?

       Well, not necessarily… it depends…

by guest blogger:  Jill Carter-Jones

Broker, Realtor, e-Pro, Short Sale Certified

What is a short sale?

A short sale is the process that occurs when a lender or bank agrees to accept less money for a property than the amount that is owed on the loan.

What is a typical scenario?

The lender/bank may agree to a short sale when and there is not enough equity in the property to sell it for what is owed on the mortgage.

  • Short sales are often granted by lenders when the homeowner (seller) has a financial hardship and a homeowner can no longer afford to make payments toward their mortgage. The homeowner may have fallen behind in payments due to an illness, loss of job, job relocation, or other events.
  • A homeowner is not always behind in mortgage payments when the short sale is requested.
  • In a short sale the lender may forgive the unpaid balance on a loan.
  • If the seller is in a strong financial position (ie; non-hardship), the lender may demand payment from the seller by issuing a “deficiency judgment” upon completion of the short sale.
  • In some circumstances, the seller may be liable for income tax on a portion or the entire forgiven amount.
  • Additional information regarding short sales can be found on

Benefits of a Short Sale to Homeowners/Sellers and Lenders:

 For the homeowner/seller:

  • One of the biggest benefits of a short sale is that it prevents the homeowner from facing foreclosure and gives them a way to sell their property when they owe more than the property is worth.
  • The homeowner’s credit will be damaged from a short sale, but there will not be a foreclosure on their credit record.
  • A short sale credit record is easier for the homeowner than a foreclosure record when attempting to purchase a home again in the future.

For the lender:

  • A short sale is also less costly for the lender.
  • The foreclosure process is expensive and it is often financially better for the lender to accept less than what is owed on a loan to avoid court costs, attorney’s fees, and filing documents.
  • It also is costly for the lender to keep the house after the foreclosure process due to eviction costs, maintenance costs, utility costs, property taxes, HOA dues, and realtor fees.

Additional information can be found at:

Benefits of a Short Sale to Buyers:

  • Buyers can benefit from excellent purchase prices
  • Short sale properties don’t always have any physical problems with the property itself because it may still be occupied by the seller

Caution for Buyers:

  • Some short sale properties may require updates to the condition of the property because some sellers have no funds to pay for maintenance, repairs, or upkeep of their property.
  • It is also important to remember that the seller and lender will most likely not agree to fixing any problems identified in the typical home inspection (since they are taking a loss).
  • Be aware that a short sale approval can take anywhere from 3  weeks to 12 months or longer for all parties to agree.
  • Sometimes, the lender will not approve the offer at all, after a considerable wait.
  • Buyers of short sale properties need to have patience.

Additional information on how long it takes to complete a short sale can be found at:

How Should a Seller Proceed with a Short Sale?

Part One: Notify the lender

  • The homeowner should contact their lender as soon as financial hardship problems arise and explain their situation
  • The homeowner should ask what the lender’s short sale procedures are.
  • The homeowner will need to fill out documentation describing the hardship, provide current pay stubs, bank statements, previous tax returns, and lender specific information.
  • Lenders are more willing to work with homeowners when the homeowner is proactive in contacting the lender when real problems arise.
  • Some lenders provide online step by step instructions on how to proceed with a short sale. Visit your lender’s website or call their servicing phone line for information. If the lender doesn’t have clear guidance, don’t worry, your Realtor can help!

Part Two: Contract with a Realtor

  • Once the lender has been contacted, the next step for the seller is to find a local Realtor who is experienced in selling short sale properties.
  • The short sale process is highly specialized and requires in-depth knowledge and experience.
  • The short sale Realtor handles negotiations with the lender.
  • If the Realtor does not have experience in loss mitigation and working with lender negotiators, the sale may fail and the seller will be at risk for losing their property to foreclosure.

How Does the Seller and Buyer Find a Qualified Short Sale Realtor?

  • Make sure the Realtor has had hands-on experience
  • Both a seller and a buyer should ask questions about successful short sale closings.
  • Ask about the short sale process and what to expect from the Realtor and lender.
  • Ask the Realtor if they have Short Sale Designations. These designations are awarded only after short sale specific education has been completed.
  • The Realtor should assist the seller in submitting documentation required by the lender, provide step by step guides on how to proceed through the short sale process, list, and market the property.
  • Once an offer is received, the Realtor will be in direct contact with the lender and negotiate a successful sale of the property.
  • Experienced short sale Realtors can better protect both the seller’s and the buyer’s interests because they have already experienced what can go wrong in a short sale transaction.
  • Not all short sale properties are a ‘great deal’. The experienced short sale Realtor will be able to identify short sale properties that are a ‘great deal’ and provide guidance in submitting offers to the seller and lender.


Black Diamond Mortgage Corporation would like to thank our guest blogger for this article:

Jill Carter-Jones

Broker, Realtor, e-Pro, Short Sale Certified

National Parks Realty


Cell: 406-249-0146


To submit a guest blog, contact David Boye at Black Diamond Mortgage to submit your topic!


A blog with Bank, Real Estate, Loan, Home buyer purchasing or refinancing of Mortgage information for Montana, and more specifically near Glacier Park, the Flathead and Tobacco Valley, County of Flathead, Lake and Lincoln, and cities of Lakeside, Somers, Bigfork, Kalispell, Whitefish, Columbia Falls, Eureka, Polson

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