Short Sale

If you're facing foreclosure and can no longer afford your home, you may qualify for a short sale—even if you don’t think you can (or haven’t been able to) sell your home.

"I want to avoid foreclosure, but I can't sell my home for what I owe on my mortgage.
What can I do?"

What is a short sale?

A short sale, also known as a pre-foreclosure sale, is when you sell your home for less than the balance remaining on your mortgage. If your mortgage servicer agrees to a short sale, you can sell your home and pay off a portion of your mortgage balance with the proceeds. Depending on your situation you may be required to make a financial contribution toward the balance, but once the short sale is complete you’ll be relieved of your responsibility to pay any remaining balance—called a “deficiency waiver.”

A short sale is an alternative to foreclosure and may be an option if you:

  • Are ineligible to refinance or modify your mortgage
  • Are facing a long-term hardship
  • Are behind on your mortgage payments
  • Owe more on your home than it's worth
  • Haven't been able to sell your home at a price that covers what you still owe on your mortgage
  • Can no longer afford your home and are ready or need to leave

What are the benefits of a short sale?

  • Eliminate your remaining mortgage debt
  • Avoid the negative impact of foreclosure
  • May be eligible for $7,500 in relocation assistance
  • Start repairing your credit sooner than if you went through a foreclosure
  • May be able to get a Fannie Mae mortgage to purchase a home sooner (in as little as 2 years) than if you went through foreclosure (up to 7 years)

What is the process for a short sale?

If you qualify for this option, the process is similar to a normal real estate sales transaction. You'll work with a real estate agent to market and sell your home. Have your agent visit for help with the short sale process. Your mortgage servicer will also be working with you and your real estate agent every step of the way to:

  • Receive list price guidance
  • Submit your best purchase offer to your mortgage servicer and any junior lien holder (if applicable)
  • Agree to terms with the buyer’s agent, and,
  • Access closing instructions from your mortgage company servicer (once the short sale is approved) to close the sale.

In some cases, you may be eligible to receive $7,500 in relocation assistance to use toward your moving expenses and to make the transition to new housing easier.

A short sale may take up to 120 days, but this could be shorter or longer depending upon your specific situation. If you are unable to sell your home, you may be able to transfer the ownership of your property to the owner of your mortgage. This option is called a Mortgage Release or Deed-in-Lieu of Foreclosure).

Next steps

Step 1

Contact your mortgage servicer —Tell them you’re interested in a short sale and want to know if you’re eligible.

Make sure you have your basic financial and loan information on hand when you call. You may need:

  • Mortgage statements, including information on a second mortgage (if applicable),
  • Income details (paystubs and income tax returns), and
  • A hardship letter.

Step 2

Explain your current situation—Be ready to outline your current hardship and explain why you are having trouble making your mortgage payment, the reasons why this is a long-term problem and inform your mortgage servicer that you want to sell your home to avoid foreclosure. Your mortgage servicer will need to understand the reasons why you're having difficulty in order to find the right solution for you.

Step 3

Contact a licensed real estate agent—Tell them you’re interested in listing your home as a short sale (if you have not already done so). Your agent will need:

  • Your mortgage servicer contact information
  • Details of any conversations and information you’ve received from your mortgage servicer about doing a short sale for your home.

Advise your agent to visit to submit a List Price Guidance Request and get the process started.

Your mortgage servicer wants to help you avoid foreclosure and, in most cases, will be willing to work with you. The biggest mistake you can make is to wait any longer to take action. Contact your mortgage servicer today to determine if you're eligible for a short sale. If you need further assistance (before or after contacting your mortgage servicer), contact a Housing Counselor.