A short sale offers home buyers an opportunity to purchase a property at a lower price while allowing the seller to eliminate or reduce their mortgage debt. Despite its name, a short sale often takes longer than a traditional home sale because the mortgage lender is more involved in the process. Below, learn more about this process—and how it differs from a standard sale—with answers to some frequently asked short sale questions.

Answers to Common Short Sale Questions

What is a short sale?

A short sale is a home sale in which the property is priced lower than the amount currently owed on the mortgage by the present owner. The mortgage lender must agree to accept this lower amount. There are specific circumstances when a lender may be open to authorizing a short sale, such as a seller in foreclosure or a seller who needs to move out quickly. In these circumstances, the lender tries to recoup at least some of the outstanding balance still owed.

How does the process differ from a traditional home sale?

The main difference between the two is the increased involvement of the lender. In a regular sale, the owner has equity in the home and can sell the property without the lender's authorization. In a short sale, the process entails the lender thoroughly evaluating the sale package to ensure they recover as much money as possible.

They also need to verify that the seller is unable or unwilling to continue to honor the terms of the mortgage. Additional paperwork and more frequent communication with the listing agent and seller's attorney are also common in a short sale.

Is financing the same?

For the most part, yes. In some cases, the lien holder might stipulate the buyer get pre-approved or pre-qualified for a mortgage before approving the offer. This is a precautionary measure that confirms the buyer has the resources to complete the purchase.

Why might a lender deny a short sale?

The primary reason for denial is that the seller cannot show valid reasons why they shouldn't pay the mortgage. Short sales are also rejected when the projected financial loss would be too great for the lender, which then often leads to foreclosure. If the homeowner files for bankruptcy, a short sale will be denied because they are prohibited in bankruptcies.

If you’re pursuing a short sale, it’s essential to have a lawyer on your side at every step of the process. The team at Bernardini Law P.C. will help you navigate a short sell and ensure you understand the legal and financial aspects involved. Since 2011, they have been representing clients throughout the Essex County, MA, region, in real estate transactions. Call (978) 794-5525 to schedule a consultation or visit them online to browse their practice areas.