Navigating a Short Sale: What to Know and What to Expect

What Is a Short Sale?

A short sale happens when a lender agrees to let a property sell for less than what is owed, often due to financial hardship or market conditions. It is a form of pre-foreclosure and may offer buyers a discounted purchase price.

Should You Use a Short Sale Facilitator?

Hiring a short sale facilitator can help streamline the process if you are unfamiliar with short sale transactions. This professional acts as the main point of contact between the seller, real estate agent, lender, and title company, making sure documentation is complete, deadlines are met, and obstacles are resolved quickly.

Key Roles in a Short Sale Transaction

The Seller’s Role

• Contact the lender as early as possible to determine the documentation needed for short sale approval.
• Begin gathering paperwork such as a hardship letter and financial statements in advance—this will help avoid delays once the property goes under contract.
• Consider working with a short sale facilitator to help manage the process.

The Agent’s Role

• Educate the seller on the short sale process, timelines, and expectations.
• Include a Short Sale Addendum with the purchase contract. (These forms are available on the DORA website).
• Set realistic closing expectations with all parties involved, as approval timelines can vary significantly.

Land Title’s Role

• As a neutral third-party settlement agent, Land Title does not negotiate short sale terms.
• We can assist with estimated settlement statements once a contract and title order are in place.
• We will also need the seller’s most recent Homeowner Association (HOA) statement to identify any outstanding dues or assessments.

Additional Tips for a Smooth Short Sale

• Many lenders require that the buyer occupy the property, and may prohibit resale within six months. This can disqualify fix-and-flip investors.
• Set contract deadlines—like inspections and document reviews—to begin after short sale approval. This helps avoid unnecessary costs and complications.
• Lenders may not approve certain seller-paid fees, so be ready to negotiate who covers specific closing costs.
• The short sale lender will make the determination whether there will be a tax liability to the seller.

Contact your Land Title Sales representative for more information.