Homeowners / What Is a Short Sale?
What Is a Short Sale?
A clear, plain-language explanation of how short sales work — and whether one might be right for your situation.
The Simple Definition
A short sale occurs when a homeowner sells their home for less than the amount they owe their mortgage lender — and the lender agrees to accept that reduced amount as full or partial satisfaction of the debt. The home is sold to a buyer on the open market, not back to the bank.
This is an important distinction: a short sale is a voluntary, cooperative process between you and your lender. It allows you to exit an underwater mortgage situation while avoiding the far more damaging consequences of foreclosure.
How a Short Sale Works
When a homeowner has an underwater mortgage — meaning they owe more on their home than it is currently worth — their lender may allow them to sell the property for less than the mortgage balance. The lender reviews the homeowner's financial situation, approves the short sale, and the property is listed and sold on the open market. Once a buyer is found and the lender approves the offer, the transaction closes and the homeowner's mortgage obligation is resolved.
Three Requirements to Qualify
Verifiable financial hardship
You must be able to document why you are unable to continue making your mortgage payments — such as job loss, divorce, disability, increased expenses, or other qualifying hardship.
Inability to pay off the balance
You must demonstrate to your lender that you do not have the cash or liquid assets to cover the remaining mortgage balance.
Monthly expenses exceed income
Your total monthly obligations — including your mortgage payment — must exceed your monthly income.
Not Sure If You Qualify?
Our expert mortgage counselors can review your situation and tell you exactly where you stand — at no cost and with no obligation. Call us at 408.740.7400 or schedule a free Zoom call.
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