Check List for a Short Sale

A good buyer is key to closing a short sale transaction.

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Short sales accounted for approximately one-quarter of home sales in late 2011, surpassing foreclosures, according to Bloomberg. A successful short sale transaction benefits the seller, lender and buyer. It is important to check for the factors that contribute to a successful short sale closing, including having the right buyer, a cooperative seller and capable agents and negotiators to facilitate lender short sale approval.

The Basics

A short sale involves selling a home for less than its loan balance. It is a process that requires the lender to approve the sale's terms. The seller is typically financially distressed and headed toward foreclosure when trying to short sale. He must meet the lender's checklist for short-selling, which includes financial hardship due to loss of income, divorce, serious illness or other unavoidable circumstances that he can document. The seller must be willing to leave the home upon its sale and cannot profit financially from it.

Buyer Requirements

It is important to determine whether the buyer is a good candidate for the transaction type. Depending on the circumstances and proximity to foreclosure, the lender might only grant one short sale approval, or opportunity to close the deal. The short sale process is more complex and drawn-out than a traditional or foreclosure sale, so a buyer must be willing to wait it out for several months. The buyer must also be able to pay a minimum sales price and close by a specific date. The agents, like the lender, must check the buyer's qualifications, such as his loan approval and the amount of money he has to close.

Negotiating Skills

The buyer's and seller's agents must have knowledge and experience working with lenders and clients in short sale situations. Because the process can be stressful, the seller's agent must guide the seller in cooperating with the lender throughout the transaction. A buyer's agent must help his buyer through the waiting process for short sale approval, advising him on status and contract terms. Sometimes, the seller's agent will employ a third-party negotiator unrelated to the lender to act on his and the seller's behalf in remitting documents and dealing with the lender directly. The negotiator can improve the chances of gaining a short sale approval faster or with better terms for all parties.


When considering a buyer's qualifications to purchase a short sale home, the agent must check for his flexibility on price and other items that the lender might require. For example, he must ask if the offer is his highest and best, or if he can pay a higher price if the lender so requires. If the price is already established, it is important to see if the buyer can pay for additional items, such as homeowner's association dues in arrears that might impede the sale. Many conventional and government-insured lenders require that certain repairs to the home be made before it can finance the buyer's loan. In such cases, the buyer might have to pay the cost of such items, as the seller is often unwilling or unable to.