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An Introduction to Short Sales in Real Estate


In the short sales real estate world, some sellers are opting for a short sale in an effort to avoid foreclosure. Homeowners typically enter into a short sale when they are facing a myriad of financial problems, including divorce or income loss. Essentially, a short sale is when the lender agrees to pay off less than the balance due on the seller's mortgage loan.  

It's important to note that a short sale is not be a panacea to making money off your real estate purchase or completely saving your credit score. While a short sale won't completely destroy your credit the way a foreclosure or bankruptcy would, sellers should expect some credit score reduction. It's up to your lender how the short sale is reported to the bureau.

A short sale can take due diligence on your part--acceptance that you won't receive a tremendous return on your investment and patience jumping through hoops and waiting for paperwork to be processed.

Prove Your Case for a Short Sale

Prepare a letter of hardship and need for the short sale in order to qualify. You'll need a cover letter detailing your financial hardship, the original purchase contract, a balance sheet of your income and expenses, asset statements, proof of income, bank statements and tax returns from two years.

Conduct a Comparative Market Analysis

Consider adding a comparative market analysis (CMA) to your case documentation if the market downfall is part of the reason you cannot sell your home. To create a CMA, you'll need to demonstrate prices of similar homes that are currently active on the market, pending sales in your area and homes sold the past six months.

Listing Your Home

For a quicker result, buyers may consider using a real estate professional with short sale experience to list their home on the multiple listing system (MLS). This online MLS network allows buyers to quickly identify a home that meets their needs. Be prepared to see the term "short sale" written prominently across any marketing materials or listing services. Usually the term "short sale" alerts the buyer that your home is priced to sell.

Also, the lender is part of the deal now and will be the entity paying the realtor's commission. In many cases, the lender will want to work directly with the real estate agent to negotiate commission.

Accepting an Offer

Once you've agreed to an offer, you'll need to provide a copy of the offer and your listing agreement to the lender. In some cases, the lender may want to renegotiate commissions and may reject paying for certain repairs and items such as a home protection plan or a termite inspection. If you feel uncomfortable or unsure about the renegotiation process, consider retaining the assistance of a real estate attorney. A real estate attorney can work as a liaison between you and the lender, while at the same time offering you strategic advice.

Real estate short sales can result in relief for the seller and a competitive sale price for the buyer. Never enter into a short sale agreement lightly and consult professional help to guide you through the process.  


Gina Ragusa is a freelance writer and mom from sunny (and sometimes not) South Florida. Her 15 year experience ranges from writing about banking to tattoo parlors. Read more about her adventures at

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