Why would my lender forgive my mortgage debt?

In most cases, the lender has already lost significant equity in the property. They will actually save money by allowing you to sell the property. (Short Sale)

What is a Short Sale, (Pre-Foreclosure Sale)?

A pre-foreclosure sale, or “short sale” is a sale of a property, where the lender (or lenders) releases their interest in the property so that the seller can sell the property with clear title.    The lender accepts less than the amount owed on a property to fully satisfy the loan. When they accept the “short” payoff, the borrower (seller) is relieved of the mortgage debt. (Applies to California. Some states do not have debt forgiveness laws.)

Example – Seller owns a home which is worth $150,000. Seller owes the bank $350,000. An offer is received for $150,000. Lender approves short sale and all proceeds go to lender. Lender accepts $150,000 and takes a loss of $200,000. The $350,000 debt is forgiven and the borrower is released from the mortgage obligation.

A short sale, handled by an experienced short sale negotiator is the easiest way to get out from under a large mortgage debt, and is often the only long-term solution for homeowners in this position.

Why would my lender accept less than what I owe?

In most cases, they have no choice. They have already lost equity because of declines in the real estate market, or because a home was overpriced at the time of purchase or refinance.   Accepting a pre-foreclosure offer almost always saves the lender significant time, money, risk and resources. Your lender is usually happy to accept a short sale offer rather than have to foreclose.

How much will it cost me to do a short sale?

Zero. A short sale is free for a seller. (Unless an inexperienced short sale agent handles the transaction. If that happens, there could be extensive costs for seller plus a significant liability risk.)

When a short sale is correctly negotiated, the lender will cover all the seller closing costs and real estate fees involved with the sale, just as they would pay these costs if they sold your property after foreclosure.

How Long will it take to complete A SHORT SALE?

A short sale should be closed in 90-120 days from the date of the listing. If a short sale takes 6 to 24 months it always the fault of the agent handling the sale. The agent will generally blame other parties, such as the agent representing the buyer, the bank, the seller, the lender, or some other party.  But there is no short sale which can’t be completed in 120 days if it is handled correctly.

Can any real estate agent do a short sale?

No. Most traditional realtors will assure you they can handle a short sale.  And they believe they can.  They don’t find out till they get involved with the bank, how much work is actually involved, and how complicated the transaction is compared to a traditional sale.  Short sales can be very complex and are outside the expertise of an agent who is used to traditional sales.  Many agents who have little or no short sale experience at all advertise themselves as short sale specialists.  Check their past client references and ask to see approval letters from their successful closed transactions. (Contact us for a list of questions to ask an agent before working on a short sale with them.)   Short sales were very uncommon until recent years. For this reason most real estate agents have very limited understanding of the short sale process.

Our experience has shown us that every short sale will have a curveball. There will be an unexpected obstacle in the transaction at some point. We have seen it all and we are prepared for the unexpected.

Do I have to miss payments to do a short sale?

No.  Many lenders will allow a short sale, even if mortgage payments are current.

Is a short sale better than a foreclosure for my credit rating?


This is the most important advantage of a short sale. A foreclosure is viewed by creditors as a major negative on your credit, worse than a bankruptcy.  Many lenders will automatically disqualify for you for a home loan for a certain period of time, usually 5-7 years.   With a short sale, however, credit can be repaired very quickly after closing.   In most cases, there will be little impact other than a few late payments on your mortgage. There are now loan programs which allow a seller to buy a home again in as little as 12 months after closing a short sale.

Are there other benefits to doing a short sale?


* A Short Sale transaction also provides much more peace of mind and predictability because you will know when the sale will close. There is no risk that sheriff’s deputies will come to your door one morning to evict you.

* You are more proactive and in control of your life. In a short sale, you are in charge. You choose the agent to list your property for sale. You respond to the offers that are received, and you are involved when we negotiate acceptance of the offer by the lender. You are more empowered because you are in control and have taken action to protect yourself and minimize the lender’s loss. Remember: Lenders accept short payoffs only because it saves them money.

I have two loans with two different lenders. Can I still do a short sale?

Yes. We will negotiate a short payoff to each lender from the sale proceeds. Even homes with 3 or 4 loans can be sold in a short sale.

Why isn’t everyone doing a short sale who is upside down on their property? Why do so many homes going to foreclosure?

Two reasons:

  1. Banks often do not advertise that they will accept short payoffs, so most homeowners are unaware that there is an easy way out of their mortgage debt.    (Every bank and mortgage company has a short sale or loss mitigation department.)
  1. Many agents avoid listing short sales. A short sale listing agent must make a commitment to work for several months, with no guarantee of ever being paid. The agents fee is paid by the lender only if and when the sale closes. If there is no closing, the agent will not get paid.
When Should I begin the Short Sale process?

As soon as you realize that you have difficulty making your payments. The sooner we can begin the negotiations with your lender, the greater the chances of a successful resolution at the highest possible sale price.

How do I get started?

Give us a call at (916) 258-2446 or fill out the form on this page.

To begin the short sale process, please fill in the form below:

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