Selling Your Property as a Short Sale

If you have determined that a short sale is right for your situation, you need to initiate the process with your lender.

Note: Keep good records! Document all calls and keep photocopies of everything you send to the lender. With so many properties in distress, it is not uncommon for the lender to misplace your file.

Lenders typically have their own pre-determined requirements for short sale application, and may demand a wide array of documentation from homeowners; however, the following steps should give you an idea of the general expectations:

Call the Lender
It may take several phone calls for you to reach the person responsible for handling short sales. Be sure to request the supervisor or manager who can make a decision on your account. They will most likely guide you to their website for a short sale application.

Your lender package may need to include the following:

Hardship Letter

This is a statement of facts, which describes how your financial hardship came about. It makes a plea to the lender to accept the terms of a short sale on your account. Things that might qualify as a hardship include: job loss or reduction in pay, disability, and personal loss. Lenders are not typically empathetic to situations involving dishonesty or criminal behavior.

Preliminary Net Sheet

This is an estimate of the total closing costs which should include:

  • Sales price you expect to receive, or the actual offer you have received
  • All costs of sale (including real estate commissions)
  • Unpaid loan balances
  • Outstanding payments due, including late fees

Submit Letter of Authorization

Lenders will not disclose any of your personal information without written authorization to do so. If you are working with a REALTOR®, lawyer, and/or accountant, you will receive better cooperation by submitting a written consent to the lender, granting them permission to discuss your loan with those interested parties.

Proof of Income & Assets

Always be honest and upfront about your financial situation, disclosing any and all assets. Assets include:

  • Savings accounts
  • Money market accounts
  • Stocks and bonds
  • Negotiable instruments
  • Cash
  • Other real estate property
  • Items with tangible value

Copies of Bank Statements

Explain any unaccountable deposits, large cash withdrawals or unusual checks.

Comparative Market Analysis

A comparative market analysis (CMA) will help the lender evaluate why you cannot sell your property for what you owe on your outstanding loan. Your REALTOR® can prepare a CMA for you, which will show prices of similar local homes that have typically sold within the last six months.

Listing Agreement & Purchase Agreement

If you accept an offer to buy from a prospective purchaser, the lender will require a copy of the offer, along with a copy of your listing agreement. It is important to note that all offers are ‘subject to lender approval’. The lender may renegotiate commissions and can refuse to pay for home protection plans and/or termite inspections. Since a majority of short sales are “as is” transactions, the lender will also likely refuse contingencies for repair and requested credits.

It is important to understand that a short sale can damage your credit score, often appearing as a “settlement” which indicates that you paid less than you owed. As part of the short sale negotiation, you should request that the lender not report adverse credit activity to the credit agencies. Even though the lender is under no obligation to accommodate this request, they may be willing to work with you to minimize your financial damage. You could also be presented with a tax bill for the unpaid debt, which is generally considered as debt forgiveness, or income to you. A team of professionals may be able to avoid or, at the least, minimize these consequences. Please consult and seek professional help with an experienced REALTOR®, attorney and/or accountants.


This information is meant as a guide. Although deemed reliable, information may not be accurate for your specific market or property type. Please consult a REALTOR® professional for more information on making a written offer.