Short Sale Hub

Your complete guide to understanding short sale options and the steps to move forward with confidence.
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What is a short sale?

Every situation is unique. These are the most common paths available to Arizona homeowners facing potential foreclosure. Understanding what’s possible can help you make the next right move.
Definition
Example Scenario
Key Benefits

A short sale happens when a homeowner sells their property for less than the amount owed on the mortgage, with the lender’s approval.

The lender agrees to accept the sale proceeds as full or partial payment of the debt — and in most cases also pays the normal selling costs such as agent commissions, title fees, and closing expenses.

Result: The seller usually has no out-of-pocket costs.

Sarah owes $350,000 on her mortgage, but her home’s current market value is only $280,000.

After losing her job, she can no longer afford her monthly payments.

Through a short sale, she sells the home for $275,000.

Her lender agrees to accept that amount, forgive the remaining $75,000 balance, and cover the typical closing costs so Sarah can move forward without added expense.

  • Avoid foreclosure and severe credit impact
  • Reduce overall debt burden
  • Maintain control over the selling process
  • Faster credit recovery timeline
  • No out-of-pocket costs for most sellers
  • Possible relocation assistance

Who should consider a short sale?

Short sales can be a solution for homeowners in a variety of financial or life situations.

Financial Hardship
Experiencing job loss, reduced income, medical expenses, or divorce affecting mortgage payments.
Owe More Than Your Home Is Worth
Mortgage balance exceeds current market value (negative equity).
Facing Foreclosure
Behind on mortgage payments and at risk of foreclosure proceedings.
Need to Relocate
Must move for work or family reasons but can’t sell for enough to pay off the mortgage.
Considering Bankruptcy
Exploring alternatives to bankruptcy while managing overwhelming debt.
Future Income or Job Stability
Expecting stable income to rebuild credit after completing a short sale.

What is a short sale?

Every situation is unique. These are the most common paths available to Arizona homeowners facing potential foreclosure. Understanding what’s possible can help you make the next right move.
Option
Credit Impact
Timeframe
Key Advantages
Key Disadvantages
Short Sale
Sell property for less than mortgage balance with lender approval
Moderate (50-150 points)
3-6 months
  • Avoid foreclosure
  • Less credit damage than foreclosure
  • May qualify for relocation assistance
  • Maintain more control over process
  • Still impacts credit score
  • Complex approval process
  • No guarantee of approval
  • May have tax implications
Foreclosure
Lender takes possession of property through legal process
Severe (200-300 points)
3-18 months
  • No need to find buyer
  • May remain in home during process
  • Ends mortgage obligation
  • Severe credit damage
  • Public record
  • Possible deficiency judgment
  • Difficulty obtaining future credit
Deed in Lieu
Voluntarily transfer property deed to lender
Moderate (50-125 points)
2-4 months
  • Faster than foreclosure
  • Less credit damage than foreclosure
  • May include relocation assistance
  • More private process
  • Must qualify with lender
  • Still impacts credit
  • May have tax consequences
  • Rare lender acceptance
Loan Modification
Negotiate changed terms with current lender
Minimal if successful
2-6 months
  • Keep your home
  • Lower payments possible
  • Avoid credit damage
  • No relocation needed
  • Must qualify financially
  • Not always available
  • May extend loan term
  • Temporary hardship only
The short sale process

A step-by-step guide through the short sale process, typically taking 3–6 months to complete. Each step builds toward lender approval and closing.

Step 1

Review Your Eligibility
Timeline:
1–2 weeks
Evaluate your financial situation and determine if you qualify for a short sale.
Key Activities:
  • Gather financial and hardship documentation
  • Review mortgage terms and property value
  • Assess eligibility based on lender requirements
  • Prepare a hardship letter explaining your situation
  • Obtain a preliminary property valuation
  • Consult with a short sale specialist or attorney

Step 2

Lender Approval Process
Timeline:
4–8 weeks
Submit your short sale package to the lender for review and approval.
Key Activities:
  • Prepare the full short sale application package
  • Submit hardship letter and financial documents
  • Provide valuation (BPO or appraisal)
  • Wait for lender’s loss-mitigation review
  • Respond to additional information requests
  • Receive preliminary approval letter

Step 3

Property Marketing
Timeline:
2–12 weeks
List your property on the market and work to find a qualified buyer.
Key Activities:
  • Work with an experienced short sale agent
  • Price property competitively for a timely sale
  • Market to potential buyers
  • Review and negotiate offers
  • Ensure buyers understand the short sale process

Step 4

Negotiation & Closing
Timeline:
4–8 weeks
Negotiate final terms with the lender and complete the closing process.
Key Activities:
  • Submit purchase contract to lender for final approval
  • Negotiate sale price and terms
  • Resolve any title or inspection issues
  • Coordinate with all parties for closing
  • Complete final settlement and transfer ownership
Qualification requirements

Lenders require documentation to confirm hardship and property value before approving a short sale.

Documented Financial Hardship
  • Job loss or reduced income proof
  • Medical expense records
  • Divorce decree or separation agreement
  • Bank statements showing financial strain
  • Hardship letter explaining your situation
  • Tax returns and pay stubs
Property Value Assessment
  • Appraisal or Broker Price Opinion (BPO)
  • Comparative Market Analysis (CMA)
  • Property must be worth less than the mortgage balance
  • Market and condition review
  • Repair cost estimates
Lender-Specific Criteria
  • No recent loan modifications
  • Loan is current or recently delinquent
  • No assets available to cover the balance
  • Demonstrate inability to continue payments
  • Must meet investor guidelines (Fannie Mae, Freddie Mac, etc.)

Important considerations

Before moving forward, it’s important to understand how a short sale may affect your credit, finances, and next steps.
Credit Impact
A short sale can reduce your credit score by 50–150 points, but typically far less than a foreclosure.
  • Appears on credit report for 7 years
  • May qualify for a new mortgage in 2–4 years
  • Less damaging than foreclosure or bankruptcy
Timeline Expectations
Most short sales take about 3–6 months from start to finish.
  • Lender approval can take 60–90 days
  • Multiple negotiations may occur
  • Buyers may withdraw if the process is delayed
Deficiency Judgment Risk
In some states, lenders may pursue a deficiency judgment for forgiven debt.
  • Varies by state law
  • Can sometimes be negotiated away
  • Legal advice recommended
Living Arrangements
Plan your next housing step since you’ll need to vacate after closing.
  • Arrange temporary or permanent housing
  • Budget for moving expenses
  • Consider short-term rental options