A short sale is defined in the real estate dictionary as “definitely maybe”. The name of this transaction that elicits groans from real estate agents got me to thinking why is it called a short sale?

A Short Sale is contingent upon the lender's approval

Is it because you are always one document short of what the bank requires even though you provided the last contact everything that was ask for? Is it because being involved in too many short sales can stunt your growth? Or is it because most agent’s work extremely hard on their clients behalf only to come up short if the bank will not approve the sale?

There is no formal education that provides the experience of actual on the job training. You can read articles on the subject, you can talk to others, you can even take classes, but until you throw your hat in the ring and announce that you are indeed a contender, preparation falls short of experience.

In case you didn’t know, a short sale refers to the sale of the property and the proceeds from the sale do not cover the loan balance, in essence coming up short. The lender has to approve a short sale because they are the last line of defense, and if an agreement is not reached then more than likely they will reacquire the property in a foreclosure proceeding.

Working a short sale can be an adventurous endeavor because there can be a lot of time and energy expended only to have the bank come back and refuse the terms of the agreement. The bank will also set the terms for which they will consider the agreement and require that the “package” (all of the required documentation) be submitted in a particular manner. Some prefer faxes while others prefer mail.

Are The Sellers Motivated?

Pursuant to the successful sale of any property is the motivation of the seller and their desire to sell. The terms of a short sale will preclude the seller from receiving any money at the close of escrow. This can drastically affect a seller’s motivation. It’s likely that some sellers have not made a mortgage payment in 6 months, and this is now reflected on their credit reports. Some have resigned themselves to the fact that foreclosure is imminemt.

A successful short sale requires the full cooperation of the seller since they are the ones who must furnish the bank with the required paperwork. These documents will consist of a hardship letter explaining why the homeowner is unable to make the payments, tax returns, pay stubs, signed IRS forms, mortgage statements a signed document allowing the agent to speak with the bank, and anything else the lender may require. The seller’s cooperation is critical at a time when many sellers have emotionally removed themselves from the property.

The short sale process can be a long painstaking event while the lender gathers all of the information. It does seem that most lenders are becoming more short sale friendly and realizing that a successful short sale can forestall an inevitable foreclosure.