Eligible Properties

• To be eligible for a short sale, properties must be in defaulted status, which is when a borrower is more than thirty days behind on a mortgage. Short sales are used as an alternative to foreclosure.
  
  

Settlement Offer

• Most lenders will require the homeowner to complete a short sale packet. This packet consists of a market analysis of the property and financial statements showing hardship. The lender can take up to 60 days to review this information prior to approving a short sale and offer a settlement for less than what is owed on the property.
  
  

Selling the Property

• A state licensed real estate agent must market the property and that agent must communicate all offers to the lender for acceptance. The homeowner can remain in the property until a new buyer takes possession.
  
  

Seller Profit

• The seller cannot make any profit on a short sale since the bank is accepting a reduced price in exchange for not foreclosing on the property. In rare circumstances, some lenders will pay a seller $1,000 to walk away from the home if the loan is underwritten with FHA guidelines.
  
  

Misconceptions

• Trying to qualify for a short sale typically only slows foreclosure proceedings. It will not prevent foreclosure.
  
  

Benefits

• The benefit of a short sale to home sellers is that a foreclosure will not be placed on their credit history. While a short sale will hurt the homeowner's credit, his score can recover faster than if a foreclosure is on his credit report.