A “Short-pay” sale occurs when the proceeds from the sale of a property (generally

residential, owner –occupied) are not sufficient to pay off the lender (or

lenders) of record in full. The lender(s), upon review of the purchase agreement,

as the lender may require, may agree to accept a pay-off that is less than

the amount actually owed. The seller will net zero proceeds. All proceeds, less

usual costs and expenses as approved by the lender will be paid to the lender at

close of escrow.

The Lender’s Perspective

A short sale can save many of the costs associated with the foreclosure process

– attorney fees, the eviction process, delays from borrower bankruptcy, damage

to the property, costs associated with resale, etc. In a short sale scenario, the

lender is able to minimize these losses by avoiding becoming the owner of the

property. The job of the Realtor or borrower (the property owner) is to convince

the lender that they will fare better by accepting less money now.

The Seller’s Perspective

Negotiating a short sale with the lender is a difficult, communication-intense

process. There can be a great deal of wait time and “bouncing around” until you

make contact with the person who can authorize a short sale of the property. A

seller must be prepared to fully disclose and document their financial situation

and work with all parties involved to make the transaction as smooth as possible.

It is beneficial, though not required, to enlist the services of a Realtor experienced

with short sales to facilitate the process.

The Buyer’s Perspective

The Buyer must observe the laws of “equity purchasing” and be careful not to

be perceived as taking advantage of the financial hardship. The offer should be

priced according to the condition of the property and the market value. These

properties will normally be sold “as is”, so buyers need to be aware of this when

selecting their financing. Buyers of short sale property need to keep in mind

that approvals are not easy to come by, and exercise patience and understanding

throughout the transaction.

The Realtor’s Perspective

To succeed in the short sale arena, Realtors must have a thorough understanding

be highly organized, and be able to complete a well-prepared package to

submit for approval, possess patience and persistence.