Comprehensive. Assertive. Creative.
We don't practice law like the others.

What are the elements of a short sale?

Purchasing a home or real estate is an exciting time. It means obtaining a family home, a new business or working in the business of flipping homes and buildings. No matter the reason for purchase, though, various steps must be completed in order for this transaction to be complete. When looking at properties, it might be more lucrative to purchase one over the other. One thing that buyers need to consider is a short sale and what this means over a purchase that is not a short sale.

What are the elements of a short sale? To begin, a short sale is a sale of property that results in the mortgage lender netting less than the amount due to the lender once all costs are taken into consideration. Why does this occur? This often happens for two reasons.

First, the home is underwater. This means that the mortgage balance is greater than the market value of the home. The second situation this could occur in is when the closing costs of the transaction does not leave enough money on the table to pay the mortgage off. Most do not realize that the second situation can occur. When closing costs cut into the bank’s payoff amount, this is considered a short sale.

There is also a third scenario, which occurs when there are multiple mortgages taken out on the home. Take for example a home that has two mortgages. The sale of the home might be enough to cover the first mortgage; however, it is not enough to pay off the second mortgage. If the seller is not able to bridge the gap with his or her own funds, this is considered a short sale.

A short sale differs from a regular real estate transaction. Because of this, this requires documents that detail this transaction. In order for a short sale to occur, there must be an underwater home, a willing short sale bank, a seller with hardship and a buyer that is willing to purchase the home. When all of these elements are present, it might be possible to complete this transaction. However, these matters can get complex, often requiring legal guidance to ensure it is carried out properly and rights are protected.

Source:, “What is a Short Sale?” Elizabeth Weintraub, March 9, 2018


FindLaw Network
Photo of John N. Spicer and Kristopher Robert Olin