Short Sale FAQ — Your Questions Answered

California homeowners behind on their mortgage may have several options depending on how far behind they are and whether the lender has started foreclosure proceedings. Common alternatives include a loan modification, forbearance agreement, short sale, or deed in lieu of foreclosure. A short sale allows you to sell the home for less than you owe with lender approval, which may be preferable to foreclosure in many situations. The right option depends on your specific financial circumstances and how much time remains before any scheduled auction.

In California, the foreclosure process typically begins with a Notice of Default (NOD). After the NOD is recorded, there is a 90-day reinstatement period, followed by a Notice of Trustee Sale (NTS) with at least 21 days before the auction. A short sale can generally be pursued at any point before the auction date, but lender review typically takes 30–90 days. Acting as soon as possible after receiving an NOD gives you the most time to complete a lender-approved sale.

A short sale does not remove a Notice of Default that has already been recorded. However, completing a short sale before the foreclosure auction prevents a foreclosure from appearing on your record. The NOD is a public record that remains, but a completed short sale is generally viewed more favorably than a foreclosure by future lenders, employers, and landlords. Your real estate attorney or financial advisor can advise on the specific credit and legal implications for your situation.

A short sale is when the bank lets you sell your home for less than you owe. This happens when your home is worth less than your loan. You find a buyer. The bank looks at the offer. If they say yes, the sale goes through. The bank takes the money and lets you walk away. All the back-and-forth with the bank gets handled for you — at no cost to you.

Most short sales take 3 to 6 months. Finding a buyer takes 2 to 6 weeks. After that, the bank needs 60 to 120 days to review and say yes. Some banks move in 30 days. Others take longer. You will get a clear timeline once the bank holding your loan is known.

There are five steps. First, your mortgage, your home value, and your situation get reviewed. Second, your home gets listed and a buyer is found. Third, the offer goes to the bank with paperwork about your hardship. Fourth, the bank reviews everything — this is the longest part. Fifth, the bank says yes and closing happens, just like a normal home sale.

Yes. You can stay the whole time. You do not have to move until the sale closes. Some banks will even pay you $3,000 or more at closing just for leaving the home in good shape. This is called cash for keys.

You likely qualify if two things are true. First, your home is worth less than what you owe. Second, you have a real reason you cannot keep paying — like a job loss, a divorce, or medical bills. You do not have to be behind on payments. Some banks say yes even if you are still current. The sooner you call, the more options you have. A quick call is all it takes to find out.