How Do Short Sales Work?

What Is a Short Sale?

A short sale happens when a homeowner sells a property for less than the total amount owed on the mortgage and the lender agrees to accept the sale proceeds.

For example, if a homeowner owes $500,000 but the home can realistically sell for $450,000, the lender may agree to a short sale rather than requiring the seller to bring the entire difference to closing.

Short sales are less common than they were following the 2008 housing crisis, but they can still happen when homeowners experience financial hardship or property values change.

The Lender Has to Approve the Sale

One of the biggest differences between a short sale and a traditional home sale is that the seller isn't the only party making decisions.

The homeowner can accept a buyer's offer, but the lender still needs to approve the sale. The lender typically reviews the offer, the property's market value, the seller's financial situation, and the estimated proceeds before deciding whether to approve the transaction.

If there are multiple mortgages or liens against the property, the process can become more complicated.

What Should Buyers Expect?

Patience is important when buying a short sale. Lender approval can take considerably longer than a typical transaction, and an accepted offer from the seller doesn't guarantee the lender will approve the price or terms.

Buyers should also understand the property's condition. Short sale homes may have deferred maintenance, and sellers may have limited ability to make repairs or provide credits.

That doesn't mean a short sale is automatically a bargain. The lender will generally evaluate the home's market value before approving a sale.

What Should Sellers Know?

If you're considering a short sale in Kitsap County, start by understanding your financial situation and available options. You'll likely need to provide financial documentation and demonstrate hardship to your lender.

There can also be tax, credit, and legal implications, so I recommend speaking with the appropriate financial, tax, and legal professionals in addition to an experienced real estate agent.

Local Experience Matters

Short sales require additional communication, documentation, and patience from everyone involved. As a Kitsap County real estate agent, I can help buyers and sellers understand the real estate side of the process, evaluate market value, and navigate the transaction while coordinating with the lender and other professionals involved.