What Is a Short Sale?

A short sale happens when a home sells for less than the amount owed on the mortgage and the lender agrees to accept a reduced payoff. It can help a struggling homeowner avoid foreclosure, but it adds extra steps, timelines, and approvals to the closing process.

🔎 How a Short Sale Works

  1. Hardship + negative equity: the owner owes more than market value and documents financial hardship.
  2. Lender submission: seller provides a short sale package (hardship letter, income, assets, taxes, etc.).
  3. List + offer: home is listed and an offer is secured, then sent to the lender for approval.
  4. Lienholder approvals: all mortgage holders (and some HOA/tax liens) may need to consent.
  5. Close + payoff: lender accepts reduced payoff; remaining balance may be forgiven or negotiated.

✅ Pros and ❗ Cons

  • Potential benefits: avoids foreclosure, may reduce deficiency exposure, and can be less damaging to credit.
  • Tradeoffs: lender control, longer timelines, “as-is” condition, and no guarantee of approval.
  • Tax/deficiency notes: outcomes vary; consult local professionals for specifics in your state.

⏱ Timelines & Buyer/Seller Expectations

  • Approval time: weeks to months; multiple lienholders add time.
  • Buyer patience: offers often wait for bank review; contingencies should reflect longer timelines.
  • Condition: typically sold “as-is”; repairs/credits require lender sign-off.

📍 Where a Short Sale Fits in FSBO

You can market a short sale FSBO with an MLS listing to maximize exposure and attract serious buyers. Be transparent in remarks about short sale subject to lender approval and factor in extra time for bank review. See how listing works here: How Brokerless Works.

🏁 Steps to List a Short Sale on the MLS

  1. Confirm eligibility with your lender and assemble your short sale package.
  2. Choose a plan and prepare photos & disclosures: Flat Fee MLS Pricing.
  3. Disclose “short sale” status in MLS remarks and set realistic timelines for inspections/appraisals.
  4. Negotiate contracts with clear contingencies and submit offers to the lender promptly.
Ready to list your short sale with full MLS exposure?
📋 View Flat Fee MLS Plans

❓ Short Sale FAQs

Is a short sale the same as foreclosure?

No. A short sale is a negotiated sale with lender approval before foreclosure. Many sellers choose it to reduce credit damage compared to foreclosure.

How long does lender approval take?

Anywhere from a few weeks to several months. Multiple lienholders or mortgage investors can extend timelines.

Will I owe the difference after closing?

It depends on your agreement with the lender and state law. Sellers should ask about deficiency waiver and any potential tax impacts.