If you’re wondering what the standard steps are that typically happen as part of the short sale process, look no further.
Step 1: The homeowner starts by talking to their lender and a real estate agent about the likelihood of selling their house via short sale. At this point, they may submit a short sale package to their lender. They’ll also have to prove to their lender that they’re no long capable of making their mortgage payments and have no assets that would allow them to catch up on payments.
Step 2: The homeowner works with a real estate agent to list the property. They’ll execute a sales contract for the purchase of the property once a buyer is interested. However, this contract is subject to the lender’s approval and is not final until then—even if both the seller and the buyer agree on the terms.
Step 3: The lender reviews the contract and could then respond in a variety of ways. They could choose not to respond at all, they could reject the offer, they could reject the offer but outline which terms they would agree to, or they just might approve the offer.
Step 4: When the lender’s response is presented to the potential buyer, the contract will either stay the same or the buyer will choose to appease or reject the lender’s terms. So, at this point, the ball is in the buyer’s court!
Step 5: If the contract is approved, the short sale property closes and the home is transferred to the new buyer. The lender receives all proceeds from the sale of the property and releases the original homeowner from their mortgage loan—even though the full mortgage balance was not paid off by the proceeds.