A “short sale” is defined as anytime a home is being sold for less than what is owed on it. This can happen if a homeowner experiences a financial hardship and either needs to sell their home for less than what they owe, or if they fail to make mortgage payments and fall into pre-foreclosure.

A home that is on the market as a short sale will go through a rather arduous process to be sold to a new buyer. The home probably won’t sell for enough to cover the loan balances, so the lenders will be asked to “forgive” a portion of the debt.

Whoever is “working the short sale” must first get an offer from a potential buyer. Then they will fill out the lender’s required paperwork, which is called the short sale package. Once the package is complete it must be submitted to a lender. The file must then be assigned to a mitigator at the bank’s loss mitigation department. These mitigator’s usually have hundreds of other files they are dealing with, so you hope and pray yours doesn’t sit at the bottom of that pile.

The realtor working on a short sale will usually spend hours negotiating with the lender. Obviously, the seller wants the negotiated price to be as low as possible to sell the home quickly; the bank wants the price to be as high as possible so they can recoup their money. So the two parties hopefully eventually come to an agreement. The lender will order a BPO, or Broker’s Price Opinion, which is usually an appraiser or real estate agent hired by the bank to visit the home to get an opinion of the home’s value. This will help the bank decide what price they are willing to accept.

This process can take months. Often times the buyer will get tired of waiting and end up walking out of the deal. When the bank finally approves the short sale there may not be another buyer in place. So it is quite possible that the whole process will have to be repeated when a new potential buyer comes along. You can begin to see how time consuming and frustrating these transactions can be.