Claude Braunstein & Associates

What is a Short Sale?

 Claude Braunstein GRI, CRP, GMS

A Short Sale refers to the situation in which the amount of money a seller receives at close of escrow, after paying off existing liens and all costs associated with the sale of the home, in insufficient to cover repayment of all existing liens against the property.

Since all existing liens must be paid in order to convey clear title, the seller must negotiate with one or more of the lenders (lien holders) to accept a payoff short of the amount owed to the lender by the seller.

Typically, the lender(s) will not process an owners application for a short payoff until the seller has procured a qualified buyer to purchase the property.

Lenders do not normally approve short sales unless the seller can prove that they have no assets with witch to cover the shortfall between the sale proceeds and the amount of the outstanding lien(s). Accepting a short payoff is voluntary on the lenders part. It is therefore possible that the lender(s) will not agree to the short sale and that the transaction will have to be aborted. For that reason, it is not recommended that the buyer expend any funds until they have been notified that their transaction has been approved.

The short pay approval process can take as little as a month or as much as four months or more, depending on the lender(s) involved. Typically, the lenders will require the seller to provide a copy of the buyers offer, an estimate of the anticipated sellers proceeds, a letter of explanation regarding the sellers financial situation, financial statements, profit & loss statements and copies of tax returns. Most likely, the lender will want to perform an appraisal of the property to insure the reasonableness of the buyers offer and the legitimacy of the short sale request.

In most cases, the property is likely to remain on the market, with the seller soliciting additional offers for submission to the lender(s), until the short sale is approved by the lender(s). Thus, there is no guaranty that the initial buyer will be able to purchase the property.

There most likely will be credit and tax consequences for the seller when a short sale is accomplished. Sellers are therefore advised to consult with professional advisors such as attorneys and tax consultants when contemplating a short sale trasaction.

Claude Braunstein has been listing and selling homes in San Diego for over 30 years. He is affiliated with Coldwell Banker, the oldest and largest real estate firm in the world. In 2005, he ranked in the top 1% among Coldwell Banker agents worldwide. Claude can be reached by telephone at 858-271-7770, or by e-mail at Claude@ClaudeBraunstein.Com.