How a Short Sale Works and When to Consider One? | reAlpha Mortgage

If you're feeling underwater on your mortgage, you're not alone. Homeowners across the country face tough choices when home values dip or personal finances change.

Heads up: a short sale might offer a way out, without the devastating impact of foreclosure.

This guide will walk you through everything you need to know about short sales-from how they work to when they make the most sense. Plus, you'll learn how reAlpha Mortgage can simplify the process and protect your interests-offering smarter ways to save while navigating tough decisions like a short sale.

A short sale allows you to sell your home for less than you owe, with lender approval, potentially protecting your credit and your future.

• Understand what a short sale is and how it differs from foreclosure.
• Know when a short sale might be the right move.
• Learn the step-by-step short sale process.
• Discover key tips for getting lender approval.
• Explore important legal, tax, and credit implications.

A short sale happens when you sell your home for less than the remaining balance on your mortgage. The lender agrees to accept less than what's owed to avoid the foreclosure process.

• You must prove financial hardship (e.g., job loss, divorce, medical bills).
• The lender must approve the short sale before listing or selling the property.
• Not every homeowner qualifies.

Pro Tip: Think of it as a "less bad" option compared to foreclosure, but not a risk-free one.

Short sales aren't right for everyone. Here's when it might make sense:

• You're behind on mortgage payments and can't catch up.
• Your home's market value has dropped significantly.
• You’ve experienced a major life event impacting your finances.
• You want to minimize long-term credit damage compared to foreclosure.

Remember: Short sales can still impact your credit score, but usually less than a foreclosure would.

• Talk to a real estate professional experienced in short sales.
• Gather financial documents (pay stubs, tax returns, hardship letter).

• Submit a short sale application.
• Wait for lender review (this can take weeks or months).

• Market your home competitively.
• Accept a reasonable offer contingent on lender approval.

• Lender issues approval.
• Buyer closes on the property.
• Sale proceeds go to the lender.

Heads up: Lenders sometimes reserve the right to pursue a deficiency judgment (the remaining balance you still owe).

Find the Perfect Mortgage for Your Dream Home with reAlpha Mortgage.

Compare options, calculate payments, and get expert guidance - all in one place.

Check if you qualify

Short sales come with real consequences you need to know about:

• Tax consequences: Forgiven debt might be considered taxable income. (Check with a tax professional.)
• Credit impact: Expect a 50-160 point drop on your credit score.
• Deficiency balances: Some states allow lenders to pursue borrowers for the remaining debt.

Consult legal and tax advisors to fully understand your exposure before committing.

• According to a report by ATTOM, short sales accounted for less than 1% of all home sales in 2023, but they still play a critical role for distressed homeowners.
• Real estate agents on Reddit emphasize the importance of hiring an agent who knows the nuances of short sales versus traditional sales.

Buying or selling during financial hardship doesn’t have to drain your future. With reAlpha Mortgage, you can unlock up to 75% of your buyer agent’s commission back-real cash that can go toward closing costs, moving expenses, or even your next chapter.

Here’s how it stacks up: 25% rebate for working with a reAlpha agent. Add a mortgage through us and get 50%. Bundle our title services to unlock the full 75%.

Need help navigating a short sale or planning your comeback? Let’s make it smarter-explore your savings now with reAlpha Mortgage.

Disclosure: reAlpha Mortgage, NMLS #1743790. This content is for informational purposes only and not intended as legal or tax advice. Always consult with a licensed attorney or tax professional for your specific situation.

A short sale is a voluntary process where you sell your home for less than you owe, with lender approval. Foreclosure is a legal process where the lender takes ownership of the property.

Typically between 90 to 120 days, depending on lender responsiveness and buyer cooperation.

Yes, but generally less than a foreclosure. Expect a 50-160 point drop, depending on your overall credit profile.

Not mandatorily, but it’s highly recommended to hire an agent experienced with short sales to navigate the complex lender negotiations.

Yes, options include loan modifications, forbearance agreements, or deed-in-lieu of foreclosure programs.

Find the Perfect Mortgage for Your Dream Home with reAlpha Mortgage.

Compare options, calculate payments, and get expert guidance - all in one place.

Check if you qualify