Home sellers could consider a Short Sale when the value of their home is LESS than the amount of their outstanding loans. 

For example, if your home is worth $200,000 but you have a loan of $260,000 then a short sale is a consideration. Obviously, if you do not have to sell your home, you could wait out the market and hope for a turnaround in real estate values. 

However, if you do have to sell your home you basically have three options. 

First, you can bring cash to the table. In the example above you would sell your home for $200,000 and pay another $60,000 to the lender out of your pocket to pay off the loan on your property. 

Second, you could let the home go intoforeclosure. The lender will go through the foreclosure process, force you out of your home and then auction it off to the highest bidder at a foreclosure or Trustee’s auction. 

The third option is to pursue a short sale. You contact the lender, explain the circumstances and convince them to take less than full value of their loan. 

If you list your property in a short sale transaction make sure that your realtor has already closed a few short sales in order to work you through the process in a professional manner. There are few in and outs your realtor needs to know.

In the case above you may tell your lender you have a buyer for $200,000 and it’s very unlikely there will be a buyer at a higher price, along with a few comparables from your neighborhood. If they will accept $200,000 for their $260,000 loan then you can proceed with a short sale. 

Sometimes the lender will consider a short sale before you have a buyer and you can market your property and, if you find a buyer, take their offer to the lender for consideration. Most likely you will have to start marketing your property as not approved short sale. The lender may or may not accept the offer. 

A short sale proceeding may take 1 month to even 9 month.