What Should I Expect When I Sell My Home As A Short Sale?

If you're falling behind on your mortgage payments or facing the possibility of foreclosure because of divorce, critical illness, you got fired, etc, you still have options. One option that might work for you is a short sale. But what does that mean? And what can you expect if you decide to go this route?

In this guide, we’ll explain everything in a simple way so you can understand what happens during a short sale, what the benefits are, and what steps you’ll need to take to get started. Let’s walk through it together.

 

What Is a Short Sale?

A short sale is when you sell your home for less than what you owe on your mortgage, and the bank agrees to accept the lower amount. The reason it’s called a “short” sale is that the sale amount is short of the total balance on your loan.

Let’s say:

• You owe $250,000 on your home loan,
   
• But your home is only worth $200,000 in today’s market,
   
• And the bank agrees to let you sell it for $200,000.
   

This type of sale helps homeowners avoid foreclosure and move forward without as much damage to their credit. But you need to prove financial hardship, and the bank has to approve the sale.

 

Why Choose a Short Sale?

Selling your home as a short sale might not feel like a win at first—but it can actually be a better path forward than foreclosure. Here are the main benefits:

1. Less Damage to Your Credit

A short sale will still hurt your credit, but it’s not as damaging as a foreclosure. Most people who go through a short sale can buy another home in about two years, while foreclosure may delay that for seven years or more.

2. Stay in Your Home Until It Sells

You usually get to stay in your home while the short sale is being processed. That gives you more time to plan your next steps and avoid a sudden move.

3. Cash Incentives Might Be Available

In some cases, banks may offer relocation assistance or even cash to help you move. These are sometimes called “cash for keys” programs and can cover things like moving trucks or rental deposits.

 

Has Your Bank Contacted You Already?

Believe it or not, some banks are now reaching out to homeowners before they even ask for help. Using their own records, banks can spot when a homeowner is behind on payments or owes more than the house is worth. In those cases, they may contact you to offer a preapproved short sale.

This is good news! It means the process can move faster and be easier than it was in the past. If you get a letter or call from your lender offering help, don’t ignore it—ask about a short sale and how to qualify.

 

Putting Together Your Short Sale Package

A short sale isn’t like a normal home sale. You’ll need to put together a set of documents for the bank called a short sale package. This helps the bank decide whether or not to approve the sale.

Even if your lender has already preapproved you, they will still need some paperwork.

Here’s what’s typically included in a short sale package:

Basic Financial Documents

• A financial statement that shows your income, debts, and expenses.
   
• Recent pay stubs or proof of any other income you receive.
   
• The last two months of bank statements.
   
• Two years of tax returns and W-2s.
   

Documents for the Sale

• A HUD-1 form or a preliminary net sheet, which shows what the sale would earn after costs.
   
• A letter explaining your hardship, such as job loss, illness, divorce, or other major financial issue.
   
• A letter of authorization, giving your real estate agent permission to talk to your bank on your behalf.
   
• A comparative market analysis (CMA) or list of recently sold homes in your area, to help show the current market value.
   

Keep in mind that every lender is different, and some may ask for more or fewer documents. Your real estate agent can help you gather everything and send it to the bank.

 

How Long Does It Take?

In the past, short sales could take many months to get approved—or even longer. That scared off a lot of buyers and made sellers nervous.

But here’s the good news: Things are much faster now. Many banks have improved their systems, and there are even federal rules that help shorten the process for homes with Fannie Mae or Freddie Mac mortgages.

So while you still need to be patient, the wait is much shorter than it used to be. Many short sales now close in a few months or less, especially when the seller is well prepared.

 

What Can Delay a Short Sale?

Even though the process has improved, there are still a few things that can cause delays:

• Missing documents: Always double-check your short sale package before submitting it.
   
• Unrealistic pricing: If you price the home too high, the bank might reject the offer. Your agent should help you price it right.
   
• Multiple loans: If you have a second mortgage or a home equity loan, both lenders must agree.
   
• Other liens: If there are tax liens or unpaid bills tied to the home, they’ll need to be handled before the sale.
   

 

 Tips for a Smoother Short Sale

Here are some smart steps to help make your short sale easier and faster:

• Work with a real estate agent who has experience in short sales.
   
• Be honest with your lender about your financial hardship.
   
• Respond quickly to any document requests.
   
• Keep communication open with your agent and the bank.
   
• Stay organized—keep copies of everything you send or receive.
   

 

The Bottom Line

Selling your home as a short sale might not feel like a win at first—but it could be the best choice for protecting your financial future. It gives you a chance to move forward without foreclosure, save your credit from deeper damage, and possibly qualify for a new home sooner than you think.

With the right help and preparation, you can:

• Avoid foreclosure
   
• Minimize credit damage
   
• Stay in your home during the process
   
• Possibly receive relocation assistance
   
• Get back on your feet sooner
   

If you think a short sale might be right for you, talk to your bank and a qualified real estate agent to start the conversation. They can guide you through the process, help you understand your options, and make sure you have everything you need to succeed.