In one sentence: You sell the house, the lender takes less than it is owed, and the foreclosure goes away, but only if the lender approves and you get the terms in writing.
Who this fits
- You are underwater, meaning you owe more than the home would sell for
- Keeping the home is not realistic
- You have some runway before the sale date, because approval takes time
If your home is worth more than you owe, do not do a short sale. You have equity to protect, so look at selling before the sale instead.
How to navigate it, step by step
- Find out what you actually owe and what the home is realistically worth. This one comparison decides whether a short sale is even the right path.
- Tell your servicer you want to pursue a short sale and request their short sale package.
- List the home, usually with an agent experienced in short sales. That experience genuinely matters here.
- Submit the offer to the lender along with your hardship documents.
- Wait through the review. This can take weeks. Keep following up and keep a call log.
- Read the approval letter closely and look for the deficiency language before you agree to anything.
- Close, and keep every document.
The one term that matters most: does the approval letter release you from the remaining balance? Ask for a written waiver of the deficiency. Without it, you can still owe the difference after the sale. Read how deficiency works.
What to watch out for
If any part of your debt is forgiven or written off, that can have tax consequences. Consult your tax advisor.
Also be careful with any "investor" who wants to buy short and quickly resell while asking you to sign unusual paperwork. Every term should be in writing, there should be no upfront fee to you, and you should be encouraged to have your own attorney review it.
Common questions
Is a short sale better than a foreclosure?
For many people it is gentler on credit and gives you more control over timing. It also creates a chance to negotiate a written release of the remaining balance, which a foreclosure sale does not.
Will I still owe money after a short sale?
Possibly, unless the approval letter includes a written waiver of the deficiency. Confirm that in writing before closing.
Do I get any money from a short sale?
Usually not, since the proceeds go to the lender. Some programs offer relocation assistance, so ask whether you qualify.