What is a Short Sale?

As a real estate agent that handles many short sales in Massachusetts,  I run into many consumers that don’t really know what a short sale is and entails.

Definition of a Short Sale

A short sale in real estate is when a homeowner cannot sell a home in an open market for the amount owed on the home.  Generally, there is a financial hardship that prevents homeowner from continuing to pay their mortgage, though we are hearing more and more about strategic short sales in the news. Once an underwater seller lists their home for sale and secures an offer then a “short payoff” must be negotiated with the lien holder(s).

I say lien holders because when dealing with a short sale property and financially distressed sellers many times we are dealing with more than just a bank.  Many times we have to deal with entities such as condo associations, mortgage insurance companies, and municipalities that may all have liens on the property.

Think of a short sale as a pre-foreclosure.  The original owner still owns and hopefully maintains the home.  All decisions regarding the home are made by the seller and the bank only agrees to release the home for sale to a buyer.   A short sale is usually the last effort before a foreclosure.  A home that has been taken in foreclosure is owned by the bank.

What do buyers need to know about short sales?

A short sale is not a license to steal property, but in many cases, you will receive a discount on the home of 3% to upwards of 10%.

You are negotiating your terms with the homeowner and not the bank.  (though the bank can sometimes drive the terms presented by the seller).  This is where a lot of confusion comes from with potential buyers.

A short sale does require time to go through the process.  If you do not have three to four months to wait for a final short sale approval, than a short sale may not be right for you.  Just because you have an offer accepted by a seller does not necessarily mean the bank will approve the short sale.  Though if the listing agent has any experience with short sales the chances are extremely high that your offer will be approved.

Finally,  a home sold in a short sale creates fewer issues to you the home buyer than a foreclosure.  Foreclosures are a complex legal process and if not done properly can wreak havoc on a future sale for you.   Also, in a foreclosure, the bank has never seen or occupied the home or been made aware of other title issues and therefore, any issues affecting the property are usually unknown.

What do sellers need to know about short sales?

If you are a homeowner that has missed a mortgage payment and can’t catch up or have to sell a home but are underwater on the mortgage then a short sale can be one of your more viable options.  Understand that you have options to foreclosure.

In general, you want to avoid foreclosure and exercise any number of options you may have to foreclosure.  Briefly the two major reasons to avoid foreclosure are:

  • Avoid a foreclosure on your credit report.
  • Have some control over the outcome of your home and financial future.  Many times in a short sale a future deficiency judgment can be eliminated or reduced.

I hope this article clarifies some key point of a short sale.  If you are a buyer looking at short sales or a seller looking to sell your home short it is important to be represented by a real estate agent that fully understands short sales.  Short sales are complex and not every agent is well versed in the process.


If you are a Massachusetts homeowner that has missed mortgage payments, or facing foreclosure or a home buyer interested in buying a foreclosure or short sale call Kevin at 978-360-0422.  I will explain your possible options to foreclosure.  Every situation is different and you have about five options to consider.  If a short sale is your best option my short sale team will work to complete a successful short sale on your home.  Combined we have successfully closed 100’s of Massachusetts Short Sales.  My closing ratio is almost 10

Other Short Sale Information:

  • Free eBook-  Should I Short Sale My Home
  • [intlink id=”258″ type=”post”]The Strategic Short Sale[/intlink]
  • [intlink id=”551″ type=”post”]Chasing the Loan Modification[/intlink]
  • [intlink id=”365″ type=”post”]What is a Short Sale?[/intlink]
  • [intlink id=”533″ type=”post”]The Short Sale and the Investor Offer[/intlink]
  • [intlink id=”328″ type=”post”]Massachusetts Short Sale vs Foreclosure[/intlink]

Short Sale Realtor Services in northeast Massachusetts,  the Merrimack Valley and surrounding area  including the towns of Andover, Billerica, Boxford, Chelmsford, Dracut, Georgetown, Groveland, Haverhill, Lawrence, Lowell, Merrimac, North Andover, Newbury, Newburyport, North Reading, Rowley, Tewksbury, Tyngsboro, Westford, Wilmington, West Newbury.