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What Is a Short Sale?
A short sale is a last-resort option for homeowners who want to avoid foreclosure.
Some or all of the mortgage lenders featured on our site are advertising partners of NerdWallet, but this does not influence our evaluations, lender star ratings or the order in which lenders are listed on the page. Our opinions are our own. Here is a list of our partners.
Updated · 3 min read
How is this page expert verified?
NerdWallet's content is fact-checked for accuracy, timeliness and relevance. It undergoes a thorough review process involving writers and editors to ensure the information is as clear and complete as possible.
Barbara Marquand Senior Writer | Homebuying, homeownership, mortgages
Barbara Marquand is a former NerdWallet writer covering mortgages, homebuying and homeownership, insurance and investing. Previously, she covered personal finance for QuinStreet and wrote for national consumer and trade publications on topics including business, careers and parenting. Her work has appeared in MarketWatch, MSN Money, The New York Times and The Washington Post.
Beth Buczynski Lead Assigning Editor | Mortgages, owning a home, dealing with debt
Beth Buczynski is a lead assigning editor on the international expansion team at NerdWallet. Beth works with writers and editors to bring financial clarity to readers across Canada's 10 provinces and three territories. Previously, Beth spent four years covering mortgages and homeownership for NerdWallet, first as a writer and later as an editor. As a writer, Beth's work was featured by The Associated Press, The Washington Post and Money magazine, among others. Beth holds a master’s degree in public communication from Colorado State University.
A short sale in real estate is the sale of a home at a lower price than what’s owed on the mortgage.
The transaction requires the lender's approval and is a last resort to avoid foreclosure when a homeowner can no longer afford to make mortgage payments.
Short sales, sometimes called pre-foreclosure or distressed sales, were common after the housing market collapsed in 2008 and left many homeowners underwater on their mortgages. Today, they comprise a much smaller share of total home sales.
A short sale isn't the only alternative to foreclosure. If you're a homeowner worried about your ability to pay the mortgage, explore mortgage relief programs before considering a short sale.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
Min. down payment
3%NBKC offers conventional loans for as little as 3% down.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
500500
Min. down payment
3.5%New American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
4.0
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
Min. down payment
0%On VA loans, NBKC offers down payments as low as 0%.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
500500
Min. down payment
3.5%New American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
Min. down payment
3%Rate offers conventional loans with as little as 3% down.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
Min. down payment
3%NBKC offers conventional loans for as little as 3% down.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
580580
Min. down payment
3%Rocket Mortgage offers conventional mortgages with as little as 1% down.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
580580
Min. down payment
3%New American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
580580
Min. down payment
N/ANew American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
580580
Min. down payment
N/ANew American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
Min. down payment
3%NBKC offers conventional loans for as little as 3% down.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
500500
Min. down payment
3.5%New American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
4.0
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
580580
Min. down payment
3.5%First-time home buyers may qualify for 3% down mortgages at Rocket.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
Min. down payment
0%Veterans United offers VA loans for as little as 0% down.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
Min. down payment
0%On VA loans, NBKC offers down payments as low as 0%.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
500500
Min. down payment
3.5%New American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
Min. down payment
3%Rate offers conventional loans with as little as 3% down.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
Min. down payment
1%Rocket Mortgage offers conventional mortgages with as little as 1% down.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
4.0
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
Min. down payment
3%NBKC offers conventional loans for as little as 3% down.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
580580
Min. down payment
3%Rocket Mortgage offers conventional mortgages with as little as 1% down.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
580580
Min. down payment
3%New American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
4.0
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
580580
Min. down payment
N/ANew American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
580580
Min. down payment
N/ANew American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
As the homeowner, you'll need your lender's approval to do a short sale. You may be eligible if you:
Recently experienced a financial hardship.
Owe more than the home is worth and can no longer afford the mortgage.
Applied for a loan modification but didn't qualify, or can't do a loan modification for some other reason, such as the need to relocate for a job.
Contact your lender or mortgage servicer as soon as possible if you think you might have trouble paying your mortgage. You may qualify for mortgage assistance, staving off the need for a short sale.
If you don't qualify for a loan modification, then you may apply to do a short sale. Be prepared to provide financial documents, such as pay stubs and tax returns.
🤓Nerdy Tip
In some states, sellers are responsible for paying the difference between the sales price and the mortgage balance after a short sale closes. In that case, you can ask the lender to "waive the deficiency" before proceeding with the short sale. Get the waiver in writing, advises the Consumer Financial Protection Bureau.
If your short sale is approved, work with a real estate agent who has experience with short sales. The agent will help you market the property and guide you through the process with the lender.
Short sale vs. foreclosure
A homeowner initiates a short sale with the lender's approval. With foreclosure, the lender repossesses the property after a borrower has defaulted on the mortgage.
A short sale has some advantages over foreclosure. As the homeowner, you:
Can plan your leave-taking, which could give you a greater sense of control in the selling process.
May qualify for paid moving expenses.
May be eligible to buy a home again sooner than after foreclosure.
Homeowner alternatives to a short sale
Consider other options before a short sale if you think you might not be able to pay your mortgage.
Mortgage forbearance lets you make lower payments or no payments at all for a certain period of time when you're experiencing a financial hardship.
A loan modification changes the terms of your mortgage so the payments are more affordable.
Need assistance sorting through the options? A housing counselor approved by the U.S. Department of Housing and Urban Development can help.
Be prepared to share your last mortgage statement and other financial documents, such as recent bank statements, credit card bills, tax returns and pay stubs. You can search for a counselor through the HUD website.
🤓Nerdy Tip
Watch out for mortgage relief scams. Beware of companies that promise mortgage relief for an upfront fee or that discourage you from contacting your lender, attorney or a government-approved housing counselor.
Frequently asked questions
Will a short sale hurt my credit?
Yes, a short sale will have a negative impact on your credit score. Generally the impact will be more noticeable if you had excellent credit before the short sale, according to the Fair Isaac Corp., which created the FICO score.
Short sales are reported to the major credit reporting agencies as a loan completed for less than the amount owed. That information will remain on your credit report for seven years, but the negative effect on your credit score will decrease during that time.
Credit scoring models generally give greater weight to your handling of credit in the most recent two years, according to Equifax, one of the three major credit-reporting bureaus.
Will I owe money after the short sale?
In some states you could owe the difference between the mortgage balance and the selling price after the short sale closes. You can avoid this by asking for a "waiver of deficiency" from the lender before the sale goes through.
Who determines the home sale price?
The mortgage servicer, the company that sends you mortgage statements and manages your loan, will be involved in the transaction. But the "investor," the bank or entity that currently owns the mortgage, has the final say on the price and other terms for the sale. Common investors are the government-sponsored entities Fannie Mae or Freddie Mac.
When can I get a mortgage after a short sale?
You'll need to wait for a bit before you can qualify for a mortgage. The waiting period varies, depending on the type of mortgage and your circumstances. It can be as short as 12 months for an FHA loan, if you didn't miss any mortgage or debt payments in the 12 months before the short sale.
Will a short sale hurt my credit?
Yes, a short sale will have a negative impact on your credit score. Generally the impact will be more noticeable if you had excellent credit before the short sale, according to the Fair Isaac Corp., which created the
Short sales are reported to the major credit reporting agencies as a loan completed for less than the amount owed. That information will remain on your credit report for seven years, but the negative effect on your credit score will decrease during that time.
Credit scoring models generally give greater weight to your handling of credit in the most recent two years, according to Equifax, one of the three major credit-reporting bureaus.
Will I owe money after the short sale?
In some states you could owe the difference between the
balance and the selling price after the short sale closes. You can avoid this by asking for a "waiver of deficiency" from the lender before the sale goes through.
Who determines the home sale price?
The mortgage servicer, the company that sends you mortgage statements and manages your loan, will be involved in the transaction. But the "investor," the bank or entity that currently owns the mortgage, has the final say on the price and other terms for the sale. Common investors are the government-sponsored entities
You'll need to wait for a bit before you can qualify for a mortgage. The waiting period varies, depending on the type of mortgage and your circumstances. It can be as short as 12 months for an
, if you didn't miss any mortgage or debt payments in the 12 months before the short sale.
How a short sale works for a buyer
Short sales are more complicated than traditional home sales because more stakeholders are involved in the process. In addition to the homeowner and buyer and their real estate agents, stakeholders include the mortgage servicer and the "investor" — the company that owns the mortgage. (Lenders often sell home loans to other banks or entities, such as Fannie Mae or Freddie Mac.)
And in some instances, the transaction may involve other lenders holding second mortgages, such as home equity loans on the property, as well as a private mortgage insurance company or a homeowners association that is owed money.
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Won’t affect your credit score
Here are the general steps for buying a short sale home:
Get preapproved for a mortgage before you start shopping. A mortgage preapproval will show the seller's lender that you have the ability to buy the home. Or be prepared to show proof that you have the money if you're buying with cash.
Choose a real estate agent with experience in short sale transactions. The agent will identify homes listed for short sale and guide you through the process.
Work with your agent to submit an offer on a home. The lender may accept, decline or send a counteroffer.
Respond to the counteroffer.
Close the deal. Work with your real estate agent to follow all the instructions to closing.
Buying a short sale home: Pros and cons
Buying a short sale property isn't for everybody. Weigh the pros and cons of short sale transactions before you start shopping.
Pros
Some buyers aren’t interested in short sales, so you might face less competition when making offers.
Sellers are highly motivated, perhaps opening the door to getting a lower price than with a traditional sale.
Cons
Short sales are more complicated than traditional home sales because they involve multiple parties.
The transactions typically take longer to complete than traditional sales.
The lender must approve the price, so your offer may not be accepted even if the homeowner likes it.
