During a short sale, a seller consults with his lender to agree to sell his current property at a lower cost than what is owed on the mortgage in order to avoid foreclosure, explains Bankrate. For the buyer in a short sale, the process requires more research than a typical real estate purchase, can be lengthy and comes with an as-is property.
A seller must default on his current loan before requesting a short sale of his property, as detailed by Bankrate. The seller assembles a package supporting his case for getting out of his mortgage obligation and submits it to his lender. He completes an authorization form that allows the lender to discuss the sale with his prospective agent, a letter of hardship explaining his financial difficulties, details of the property's value, a purchase offer, and a settlement statement detailing the lender's potential loss.
To ensure a successful purchase, the buyer in a short sale confirms that the property is actually in default, otherwise the short sale is not valid, according to Forbes. The buyer also verifies that no second mortgage exists for the property. The deal is not obtainable if all lien holders are not in agreement about the short sale. Lengthy short sales frequently result from mounds of paperwork, negotiations and dealing with multiple lenders, reports Zillow.