What Is a Short Sale?

A short sale is when a buyer makes an offer on a house that is less than the mortgage payoff. The buyer submits an offer and negotiates with the bank to buy the house for less than the loan balance.

Here is an example of how a short sale process may work:

  • Home Value $300,000
  • Home Loan: $310,000

In order to pay closing costs, realtor commissions and other expenses involved in selling your house, you would have to price the house around $340,000 – $350,000. If a $300,000 offer price came in from a conventional buyer, you would have to come to closing with $40,000 – $50,000 of your own money to sell your house.


When you have little to no equity and you are facing foreclosure, this is one of your options to sell your house.

For homeowners who can’t sell their house because they have to either price their house too high to sell or they have to come to closing with a substantial amount of money, the option of a short sale process would look more like this:

  • Home Value: $300,000
  • Home Loan: $310,000
  • Buyer’s purchase offer to the mortgage company: $240,000

The buyer makes an offer on your house for $240,000 – $260,000 and negotiates with the bank to accept the lower pay off.

The Advantages of a Short Sale:

  • Sell your house, when otherwise you might not have been able to,
  • Avoid foreclosure (which is a credit catastrophe),
  • Homeowner doesn’t have to close with a significant amount of money,
  • Stay at your house and save up money to move while negotiations with the bank are occuring.

The Disadvantages of a Short Sale:

  • A negative impact on the homeowner’s credit (mainly because of the late payments), a better option than bankruptcy or foreclosure.
  • There is about a 50% chance of the bank still foreclosing, usually due to bank mishaps.
  • You may receive a deficiency judgement or a 1099 for the bank’s loss.

Short sale process can take 2 – 6 months, sometimes more, and they is a very complex and time-consuming transaction. Markette Properties has a processing team for Short Sales due to the immense amount of work involved in the process.