Short Sales Information

Short Sales: A Path Forward When You Need Options

When mortgage payments become unmanageable, many homeowners feel trapped between bad options. The truth is, you have several paths forward, and understanding each one empowers you to make the best decision for your future. A short sale—selling your home for less than you owe with your lender’s approval—often provides the most control and least damage to your financial future. This guide will walk you through everything you need to know about short sales and your other options.

Understanding Your Choices

When facing mortgage hardship, it’s important to know all your options before making any decisions. Every situation is unique, and what works for one homeowner might not be right for another. Some options allow you to keep your home if your financial situation improves, while others help you transition out of homeownership with minimal damage to your credit and financial future. The key is acting quickly—the sooner you explore these alternatives, the more choices you’ll have available.

Your Options: From Best to Worst Credit Impact

We believe in giving you the complete picture. Here are all available paths when facing mortgage hardship, ranked by their impact on your credit and future financial opportunities.

Options That Let You Keep Your Home

1. Loan Modification
   Work directly with your lender to permanently change your mortgage terms—potentially lowering your interest rate, extending your loan term, or reducing your principal balance. This is ideal if you want to stay in your home and have stabilized income that can support modified payments.
2. Repayment Plan
   Catch up on missed payments gradually by paying your regular mortgage amount plus an additional portion each month. This works best if you’ve experienced a temporary financial setback but are now back on stable ground.
3. Partial Claim (FHA Loans Only)
   If you have an FHA loan, your lender may secure a one-time payment from the FHA insurance fund to bring your mortgage current. This creates a second loan that’s typically interest-free and due when you sell or refinance.

Options for Moving On

1. Short Sale
   Sell your home for less than your mortgage balance with your lender’s approval. You maintain control of the timeline, avoid foreclosure proceedings, and can typically qualify for a new conventional mortgage in just 24 months. Your credit score typically drops 85-160 points compared to 250-300 for foreclosure.
2. Deed in Lieu of Foreclosure
   Voluntarily transfer your property ownership to the lender in exchange for release from your mortgage obligation. While faster than a short sale, this option often damages credit as severely as foreclosure and many lenders require attempting a short sale first.
3. Foreclosure
   The lender forces the sale of your home through legal proceedings. This is the most damaging option—it becomes public record, severely damages credit for 7+ years, and you risk eviction by sheriff. Bankruptcy might delay but won’t prevent foreclosure, and combining both devastates credit even further.

Why Choose a Short Sale?

A short sale offers unique advantages when keeping your home is no longer possible. Here’s why it might be your best strategic choice:

You Stay in Control

Unlike foreclosure where the bank dictates everything, a short sale puts you in the driver’s seat. You choose when to list, select your real estate agent, and have input on your moving timeline. You’re selling your home, not being evicted from it.

Protect Your Financial Future

Credit Recovery: While any mortgage default hurts, short sale damage is temporary. You can qualify for:

• FHA loans in 3 years (sometimes sooner with extenuating circumstances)
• Conventional loans in 2-4 years
• Credit cards and other credit often within 1-2 years

Compare this to foreclosure’s 7-year waiting period for conventional mortgages.

Deficiency Protection: In Washington State, this is crucial. After foreclosure, second mortgage holders and home equity lenders can pursue you for unpaid balances. After a short sale, they cannot. This protection alone could save you tens of thousands of dollars.

No Out-of-Pocket Expenses

In most short sales, the lender pays for:

• All real estate commissions
• Closing costs
• Outstanding HOA liens
• Delinquent property taxes
• Title and escrow fees
• Other standard selling expenses

You typically won’t pay anything to complete the sale.

The Short Sale Process

Understanding the process removes fear of the unknown. Here’s what to expect:

Step 1: Initial Consultation

We review your financial situation, mortgage documents, and property details. This confidential meeting helps determine if a short sale is your best option. We’ll need:

• Recent mortgage statements
• Basic financial information
• Hardship explanation

Step 2: Listing and Marketing

Your home is listed and marketed just like any traditional sale. We use professional photography, online marketing, and our network to attract qualified buyers. You continue living in your home during this period.

Step 3: Offer and Negotiation

When we receive an offer, we simultaneously:

• Negotiate with the buyer for the best terms
• Submit the short sale package to your lender
• Work with the lender’s negotiator for approval

Step 4: Approval and Closing

Once your lender approves the short sale (typically 30-90 days), we proceed to closing just like any real estate transaction. You’ll have time to relocate, and in some cases, lenders offer relocation assistance.

Protect Yourself from Scams

Unfortunately, distressed homeowners are often targets for scams. Protect yourself by knowing these warning signs:

Red Flags to Avoid

• Upfront fees: Never pay advance fees to anyone promising to “save” your home
• Deed transfers: Never sign your deed over to an “investor” or stranger
• Payment diversions: Only make mortgage payments to your current lender
• Guaranteed outcomes: No one can guarantee specific results with your lender
• Pressure tactics: Legitimate professionals give you time to make decisions

Legitimate Resources

These are free, trustworthy sources of help:

• MakingHomeAffordable.gov – Federal homeowner resources
• Washington DFI Short Sale Guide – State-specific information
• HUD-approved housing counselors – Free, legitimate counseling (800-569-4287)
• Your lender’s loss mitigation department – Direct communication is always free

Important Considerations

Tax Implications

Cancelled debt from a short sale may be considered taxable income. However, the Mortgage Forgiveness Debt Relief Act may protect you if the property was your primary residence. Always consult a tax professional about your specific situation—the consultation cost is worth avoiding surprises.

Legal Matters

While not always necessary, consulting an attorney can be valuable, especially if you have:

• Multiple mortgages or liens
• Investment properties
• Complex financial situations
• Concerns about deficiency judgments

Taking the Next Step

The hardest part of this journey is often making the first phone call. Remember:

• Your situation is temporary, even if it doesn’t feel that way
• Thousands of homeowners have successfully used short sales to move forward
• The sooner you act, the more options remain available
• There’s no obligation to proceed after an initial consultation

We understand this is one of the most stressful situations you’ll face. Our experienced team has helped hundreds of homeowners navigate short sales with dignity and success. We’ll explain everything clearly, protect your interests, and guide you toward a fresh start.

Contact Us Today

Don’t wait until your options disappear. Contact us for a confidential, no-obligation consultation about your situation. We’ll review your circumstances, explain all available options, and help you make the best decision for your future. You don’t have to face this alone.

Remember: The situation you’re in today is not where you’ll be forever. With the right guidance and decisive action, you can get through this and rebuild. The first step is reaching out.