Every time I am in front of a crowd, some “comedian” yells from the audience that I should stand up. I’m short, o.k. It’s not a problem. I guess any sale I make is a “short sale” but that’s not what we are talking about here. In a nutshell, a short sale is an agreement between a homeowner and their lender to accept less than owed on the sale of the property. In other words, the owner/seller is selling “short”. Sounds simple but as with most things in real estate, a short sale is tedious, time consuming and complicated. To start, things don’t occur in a normal sequence. A lender won’t even talk to a borrower about a short sale until an offer is in hand. They aren’t willing to disclose ahead of time how “short” they will sell. Along with the offer, the seller submits an application, a financial statement and a Realtor® authorization. Here’s where it gets tricky. Most short sale properties were recently purchased or refinanced. This means the lender has a recent purchase application from the borrower. The lender has the right to compare the original loan application with the newly submitted financial statement. According to one real estate attorney, if the lender detects mortgage fraud (which could become apparent if there are glaring differences in the application and financial statement) they must report it to the Dept. of Justice (Federal) for prosecution. Consulting a real estate attorney prior to filing the application could be prudent. After the application is submitted, the Realtor® must submit a copy of the listing agreement, the estimated closing statement and the fully executed contract. The lender will order either a full appraisal or an opinion of value from a Realtor®. They love to ask Realtors® because, in this instance, they feel we work cheap. That’s because most agents who do such evaluations use them as a training tool. Lenders don’t even pay enough to buy our gas. Once the lender receives all the pieces, the file is added to the stack and passed from one “specialist” to the next. There’s never a single point of contact. I suppose this helps eliminate the possibility that a processor will become to close to the file. It also means that the process can take a very long time. Remember, the lender does not care if closing is delayed. They really don’t care if the buyer cancels or if their loan lock expires. And while recent legislation makes the forgiven debt on a principal residence non-taxable, it’s still reported as income on investment properties. A short sale will certainly affect your credit report and credit score. Before considering a short sale, speak to your agent. They may be able to suggest alternatives. It’s best to work with an agent familiar with the process. Don’t wait until the last minute and remember, as tough as it is, a short sale beats a foreclosure any day. Which just goes to show, being “short” isn’t always such a bad thing!