What Is a Short Sale in Real Estate? Complete Buyer's Guide
A short sale occurs when a homeowner sells their property for less than the amount owed on the mortgage, with the lender's approval. The lender agrees to accept the reduced payoff to avoid the greater cost of foreclosure.
How Short Sales Work
- Homeowner falls behind on payments and owes more than the property is worth
- Homeowner submits a short sale package to the lender (hardship letter, financial statements, purchase offer)
- The lender reviews and decides whether to approve, counter, or reject
- If approved, the sale proceeds with the lender forgiving the difference
Timeline
Expect 60-120 days for lender approval, sometimes longer. Total process from offer to closing: 3-6 months. Multiple lien holders extend the timeline further.
Pros for Buyers
- Below-market pricing (10-30% discounts common)
- You can inspect the property before buying
- Standard financing is usually acceptable
- Less competition than traditional listings
Cons for Buyers
- Extremely long timeline — months of waiting
- Lender can reject at any point
- As-is condition with deferred maintenance
- Multiple approval layers slow everything down
Tips for Short Sale Success
- Work with an agent experienced in short sales
- Submit a complete package the first time
- Be patient and have a backup plan
- Do not assume you will get a huge discount — many sell near market value