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I have many clients and customers who have questions about shortsales.   I must clear up some confusion about shortsales. 

A shortsale simply means that the seller owes more money to the bank or lienholder then the property is currently worth.  Due to the fact that property values have been coming down, there are many houses selling short. 

In a shortsale situation, the bank must agree to accept the reduced payoff.   All banks handle each case differently but when a request is made by a realtor or homeowner, most bank’s usually want a hardship form filled out.  I want to clarify that seller’s that are current with their payment and have not had a change in  income, might not be looked upon as a hardship.  Of course, previous payment history and hardship is factored in when a bank is making their decision whether to negotiate.  If a bank is in agreement and an offer is made on a property, it must go to a bank representative for approval.  The bank will then ask for a Settlement Statment or HUD to be sent with ALL the seller’s expenses deducted, in order for them to find out their net.  To clear up lots of  questions I have been getting regarding these expenses, they come from the proceeds of the sale of the home.  In layman’s terms:  The buyer does not lay out extra money other then the amount they are willing to pay.  Again, this does not mean that the initial offer will be accepted if the bank does not agree.

Keep in mind, some shortsales are selling for current fair market value because if a house is desirable and there are multiple offers the bank will take the highest offer.