Short Sales    
short sales
Short Sales Short Sales Short Sale Questions Short Sale Resources Prequalify for Short Sale

Short Sales


What is a Short Sale?

In a Short Sale a homeowner is permitted to sell their home for less than what is owed. This negotiation process becomes necessary when a selling homeowner owes more than it is worth.

A Short Sale is generally available to those who suffer financial or personal hardship. This negotiation process is not simply an escape from a bad investment or an ill-suited loan, a true hardship must exist. As part of the Short Sale negotiation a lender can release the borrower from any future liability on the mortgage.

Short Sale Example

We offer the following as an example of a real and typical Short Sale situation (Please keep in mind that this example does not constitute a guarantee or prediction as the outcome of each individual's legal matters):

Victor R. from Costa Mesa, California

2006 -
Bought a House for $701,000
100% Financing
$570,000 on the 1st loan
$131,000 on the 2nd loan
2009 -
House is valued at $570,000

Short Sale Negotiation - 1st lender accepted $433,000 and give $3,000 to 2nd lender. 1st lender also paid 5% commissions, termite repairs & closing costs. 2nd lender agreed to $3,000 settlement and released their lien (See our glossary on our Short Sale page for the definition of lien as well as other relevant terms).

Victor sold his house, minimized the impact on his credit and avoided foreclosure!

This example does not constitute a guarantee, warranty or prediction regarding the outcome of your legal matter.

The Short Sale Process

A Short Sale transaction generally takes between 3-6 months to complete. The timeframe for each sale cannot be guaranteed and will depend greatly on the specific lenders involved. Initially, a consultation is done to determine if a Short Sale is feasible for a seller. This determination is made by a thorough financial assessment of the seller's financial situation.

The next step involves the IFR processing team. The IFR processing team works directly with the seller to collect and compile the requested information of the seller, including: the hardship letter, a property profile and necessary financials. Once this information is received by the IFR processing team a Short Sale package is created for submission to the lender(s) and an IFR negotiator is assigned.  The package gives the lender an accurate picture of the sellers’ true hardship and a compelling reason to work with the seller.

The next critical step is the negotiation process.  IFR’s experienced negotiators and coordinators have frequent communication with the lender to negotiate the best and fastest result for the seller.  The IFR team regularly reviews each and every client file and updates the progress of the file into an online database throughout the negotiation process.

Once the Short Sale is approved by the lender the sale can proceed to close.  IFR recommends that the terms of the Short Sale approval letter be discussed with the sellers’ attorney and tax specialist prior to acceptance.  The IFR team prides themselves in maintaining open communication with the lender and the client throughout the entire Short Sale process.

Still have questions? Please visit our Frequently Asked Questions (F.A.Q.) page. You may also submit a question on the homepage or contact our office directly at the following toll free number, (866) 990-1437

Short Sale Qualification Criteria

Based upon the answers the borrower provides in the Short Sale Feasibility Form, this borrower would fall into one of three categories below:


Borrower can demonstrate a valid hardship
Borrower's expenses exceed income
Borrower's liabilities exceed assets
The offer is at or above the fair market value
Only one loan exists that was a Purchase Money Loan
Two loans exist and both are Purchase Money Loans
No liens exist with HOA, IRS or private investors & No PMI issues
Borrower has a great attitude and is likely to cooperate


A first that is refinanced
A second that is refinanced
The existence of challenging liens
Loans with Private Mortgage Insurance (PMI)

(The more factors present in this category, the more difficult)

Borrower is in bankruptcy
Borrower cannot demonstrate a valid hardship
Borrower's income largely exceeds monthly payments
Borrower's expenses exaggerated or not considered necessary
Borrower's assets exceed liabilities
Liens that may require extensive negotiation and legal support
Offer is below fair market value
A foreclosure sale is imminent and the property has no offers
Borrower is difficult to work with and unlikely to cooperate

 Qualified Hardships for Short Sale

• Job Loss or Significant Reduction in Pay
• Increase in Household Expenses
• Divorce, Legal Separation
• Illness/Disability
• Forced Relocation
• Military

• Begin Being Late on Mortgage Payments
• Depleting Your Savings
• Jeopardizing Your Future and the Family's Future
• Ruining Credit and Ability to Borrow

 Lender's Required Documentation

• A Handwritten Hardship Letter
• A Complete Household Financial Statement
• Current Mortgage Statement for Each Loan
• Last 2 Tax Returns
• 3 Most Recent Pay Stubs
• 3 Most Recent Bank Statements

Note: This Information MUST be packaged and identified in the proper "stacking order."

 Credit Rating Impact & Taxes

Every 30 day late payment negatively impacts your credit. Act as soon as possible!
• Some strategies, such as forbearance or any debt forgiveness may also negatively impact your credit .
• Depending on the type of loan, forgiveness of debt can be treated as income. The lender by law will issue a 1099 form for the forgiven debt. To determine if you may be exempt from claiming the 1099 income on your federal income tax return you should seek the advice of your accountant or CPA.

For additional information visit the article titled, "Home Foreclosure and Debt Cancellation" on the IRS website. Also, see the Franchise Tax Board Link on the IRS website as well.

 Most Common Mistakes Made with Lenders

• Talking to the wrong department
• Giving too much information or saying too much
• Not providing all the required documentation
• Not knowing what information the lender needs
• Not understanding mortgage types & guidelines
• Not understanding the bank process
• Not properly completing an effective hardship letter and financial statement that the lender will approve
Lack of consistent follow-up

Sean H. from Huntington Beach, California gives his testimonial of his success working with Innovative Financial Resources.

"Thank you [IFR], for saving me from foreclosure! Now I can start rebuilding my life. When I started working with you in 2008 my future was very bleak. I was mentally exhausted from the non-stop collection calls. You took charge of the situation and worked diligently through 3 buyers who walked away at the last minute. After 8 months the Short Sale finally closed and the bank didn't foreclose on me. I was even able to settle with the second lender without them going after me. Now I can look forward to the future. Thank you so much!"

This testimonial does not constitute a guarantee, warranty or prediction regarding the outcome of your legal matter.

 What To Do Now...

If you are starting to experience financial difficulties, BE PROACTIVE! Call us NOW before you become late. If you are already late NOW IS THE TIME TO ACT!--even if you've received a Notice of Default from your lender.

We understand that you are in a difficult circumstance and have structured our fee accordingly. We require NO UPFRONT FEES and get paid once the sale closes. We can help you regain peace of mind that will allow you to move on with your life.

Get Started by filling out our Pre-qualification Form for Short Sale. Upon receiving your submitted form, an IFR professional will contact you for a confidential consultation to determine if a Short Sale will work for you. IFR provides the following services to complete the Short Sale of your home:

Proper Preparation of your Short Sale file..
Guidance in writing a strong Short Sale package.
Negotiate with your lender(s) on your behalf.
Provide consistent follow-up with your lender.
Request lender(s) report in such a manner to have minimal impact on your credit score.
Request lender(s) to forgive outstanding balances on loans as part of the Short Sale agreement.
Provide documentation necessary to stop collection calls.
Help you avoid scams.

Contact us at (866) 990-1437

Disclaimer: The information provided on this webpage is general information and should not be confused with legal advice. If you require legal advice for your individual circumstances, please consult with your attorney. All information provided is deemed reliable, but not guaranteed. YOU MUST SEEK ADVICE FROM A KNOWLEDGEABLE ATTORNEY OR EXPERIENCED TAX SPECIALIST REGARDING YOUR LEGAL RIGHTS AND TAX IMPLICATIONS OF A SHORT SALE.

Short Sale Glossary

Deficiency Judgment - A civil judgment obtained by a lender to receive payment in the full amount of the unpaid principal balance of a promissory note when only partial satisfaction of the note has been obtained. The character of the loan, the type of foreclosure action pursued (judicial or non-judicial) and where the property is located are among the factors that can determine if a deficiency judgment is permitted. Keep in mind the character of a loan can change (i.e. via a refinance).

Judicial Foreclosure - A costly and time consuming foreclosure method wherein the property which secures a promissory note is sold through a court proceeding. This process requires compliance with standard legal steps to be valid.

Lien - In California, liens are generally given priority based on their recording date. Title insurance serves the purpose of ensuring that a purchase money lender will take first position.

Loss Mitigation - An effort by the lender to help the borrower who has been unable to make loan payments and is in danger of defaulting on his or her loan; a process to avoid foreclosure.

Non-judicial Foreclosure - A foreclosure method that does not require court involvement but in California requires compliance with California Civil Code requirements.

Non-recourse Loan - A loan in which the lender, upon default, is limited to the sale of the property to satisfy the unpaid promissory note.

One-action Rule - A rule that limits in which a lender can be recompensed for a default on a purchase money loan. Under this rule a lender is essentially required to choose their best option: a civil judgment of the unpaid principal balance of the promissory note or seek title to the property through a foreclosure.

Recourse Loan - A loan in which the lender, upon default, is permitted to seek a judgment against the borrower personally to satisfy the unpaid promissory note. Many times a "refinance" or a "second" are classified as recourse loans.

Short Sale - A negotiation process which permits a homeowner to sell their home for less than what is owed.

This information provided is for informational purposes only. IFR recommends each individual consult with a knowledgeable accountant or attorney as to how a Short Sale may impact them.





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