What is a Short Sale?


WHAT IS A SHORT SALE? A Short Sale (Also referred to as: Negotiated Settlement, Short Pay or Pre-Foreclosure) occurs when a Lender agrees to accept less than the amount owed on the original note or total payoff, as an alternative to foreclosure. If the property is worth less than the amount owed on the loan, than even if the Lender forecloses and takes back the property, they know they are going to take a loss. We can often convince a Lender that they will do better if they take less than what is owed now rather than taking the property back by foreclosure and trying to re-sell it.


HOW LONG WILL IT TAKE? The Short Sale negotiation process can be rather lengthy. It may take several weeks to several months for an approval. Many Lenders will have several layers of bureaucracy, insurers, and investors that we will have to maneuver through in order to get a Short Sale approved. So, it is important to be patient during this long process.


MY HOUSE IS GOING TO FORECLOSURE, WILL I HAVE ENOUGH TIME? Maybe-maybe not. Just starting a Short Sale will NOT automatically stop a foreclosure. However, many times we can convince a Lender to stop the foreclosure to let us attempt to negotiate the Short Sale. While there are no guarantees, it is worth the attempt.


CAN I STAY IN THE HOUSE? The key word in a Short Sale is sale. The purpose of a Short Sale is to get the property sold. This is not a program that can stop a foreclosure and allow you to keep the house indefinitely. Moreover, it will be easier to sell the house if it is vacant. Therefore, you should most certainly begin making plans to vacate the property.


HOW DO I KNOW THIS WILL WORK? Again, there are no guarantees. We cannot, have not, and will not make promises to you that this will work. Once you miss a payment, the Lender is in charge and can proceed to foreclosure if they want to. But we know they do not want to and we are very good at presenting alternatives to he Lender that they often want to accept, as opposed to moving forward with a foreclosure. We are very proficient at what we do, but NO GUARANTEES are being made as to whether or not the Lender will accept the Short Sale.


WILL I GET ANY MONEY FROM THE SALE? No. A universal requirement of Lenders in granting a Short Sale is that the borrower will not get any proceeds from the sale of the property. Being, he Lender is going to take a loss on your loan, they are most certainly not going to allow you to profit from the situation.


WHAT HAPPENS IF THIS DOESNT WORK? Your house will likely go to foreclosure. A Short Sale is something we try after you have exhausted your other options.


WHAT IS A RELEASE? A Lender may offer a release. Which is a security instrument against the property in exchange for less than the total amount of the note. A release will allow the property to be sold without paying off the obligations of the note. However, the note is not satisfied. Advantages: This successful Short Sale will allow the property to be sold and thus avoid foreclosure. Disadvantages: The remaining debt on the property (sometimes called a deficiency) still exists. In other words, you are still liable for the note and still owe the money to the Lender. Reality: It is not likely the Lender will purse the deficiency unless you have other significant assets. However, if you chose not to try the Short Sale before going to foreclosure, and then you end up going to foreclosure, it will result in you having a deficiency anyhow.


WHAT IS A SATISFACTION? A Lender may agree to accept less than they are owed as complete and total satisfaction of the note and release its lien against the property. Advantages: Your note and obligation to the Lender are satisfied for less than you owed. When the property is sold, the debt is paid off completely. Disadvantages: You may have some tax consequences that you should discuss with your tax advisor due to the fact the Lender is making money you owe them disappear. Sometimes our negotiations are successful in obtaining a satisfaction. Although there are other times where the lender will only negotiate to a release.


HOW CAN I HELP? The Lender will require a review of a financial package that usually includes: (2) months banks statements, (2) months paycheck stubs, (2) years tax return, Financial Worksheet and other information. The leading cause of delay and even denial of our offer to the Lender is caused by the Seller failing to cooperate and/or deliver the necessary items in a timely fashion. To help us succeed, please find as much of this information as you can right now and complete the attached Financial Worksheet. These things will help us work faster and increase your odds of a successful Short Sale.


Expectations and Timeline


Marketing your home:

Your home will be shown to both investors and traditional buyers. During this process, your process may be shown several times a day in some cases. The goal is to get the highest and best offer in the shortest time possible. Those viewing or calling to view your home have been instructed not to bother you with questions regarding the short sale so as to not put any additional stress on you.


The First Offer:

Once an offer is received on your property, I will schedule an appointment for you to come in and sign the Purchase Agreement (this should only take 5 minutes). Although, you do need to sign one offer, your property can attract multiple offers. All offers will be submitted to the lender(s) for their review and you will not need to sign each and every offer that we receive. Towards the end of the process, when the lender accepts an offer, you will need to sign that offer in order for us to open escrow.


The Process:

Once we have sent the offer(s) to the lender(s), the actual Short Sale process can take anywhere from 4 weeks to 4 months. This timeline varies with each lender. To keep you informed, I have developed a system which will enable you to get updates from me on a regular basis without actually having to call me. First, you will be able to call any time (925-998-3078).


The second way to get an update is to send me an email with your property address and question in the subject line. ([email protected]). Due to the high volume of calls from prospects, clients, agents, escrow offices and lenders, it is almost impossible for me to respond/return calls same day. In many cases I am not able to return calls personally, since Im spending most of my time negotiating a successful transaction with your lender(s).


Please understand that I am not intentionally waiting to return phone calls and I am not ignoring your messages, it is simply not humanly possible for me to return all my own calls in a timely manner and still move forward to a successful transaction. Know that I will return all calls within 24hrs to give you an update.


After the lender reviews the Short Sale package, a BPO (Broker Price Opinion) will be ordered by the lender. This is similar to an appraisal and once the lender receives their report, they will usually make a final decision shortly thereafter. The lender orders the BPO so they can figure out what their net proceeds will be (how much of a loss they will be writing off). Your property will remain Active on the MLS until the lender accepts the offer. Please be patient throughout this process. At times you may feel things are going too slow, but remember this is not a regular transaction and can take longer to complete.


The Accepted Offer:

Once an offer has been approved by the lender, I will notify you that we are going to proceed to close the transaction. The lender may demand to close escrow anywhere from 10-30 days, so be prepared. If the buyer does not close by the lenders deadline, the next highest bidder in line may be accepted. ** If the buyer(s) cannot perform and close on time, the lender may decide to proceed with foreclosure thus severing the opportunity for all parties involved to complete a successful transaction. **


The Close of Escrow:

You, as the seller, will be instructed to sign seller documents at the escrow office. Please bring with you your I.D., all keys, garage door openers, and a good attitude. We will celebrate your new freedom from this financial burden and stress.


Your Financial Freedom:

Keep all of your copies of the documents pertaining to this sale in a safe place. Call me with your new forwarding address so I can keep in touch with you through the year and offer you assistance in preparing yourself for future success. Try not to incur any new debt and try to keep low balances on any credit cards you may have. Maintain good consumer credit by not paying late on your currently active accounts. Pay your rent by check or some other way that can be tracked to show evidence that you are paying on time. This will help you should you choose to purchase a new property in the future.




                    Required Short Sale Documentation:








   Please gather all the critical documents listed below PRIOR to our Listing Appointment




             o Client and Property Information (Page 1&2)


             o Hardship Letter (Examples Enclosed)


             o Financial Statement (Form Enclosed)


             o Most recent Mortgage Statement(s)


             o Copies of last 2 months Pay Stubs or letter of explanation


             o Copies of last 2 months Bank Statement or letter of explanation


             o Copies of last 2 Year Tax Returns or letter of explanation


             o Copies of last 2 HOA Statements (if applicable)




** If you should have any questions or are missing any of the above mentioned documents, please give us a call, so we may further assist you in preparing for our Listing Appt.





                                                   Hardship Letter Guidelines



Remember to state the following in your HANDWRITTEN Hardship letter:


1. Hardships V What are your hardships (current and past). Such as: unemployment, car accident, medical problems (personal or family related), Divorce, Death Etc. Go into a little detail about each hardship. The following are the most important messages to convey to the Lender:


A. Why you will not be able bring yourself current again on your loan.

B. You do not have enough income to make these payments any longer.

C. You are leaving the property.


2. Your Assets V Explain that you have no assets with which to continue paying.


3. Any Signed Exemptions of Documents V If you do not have bank statements, pay stubs or tax returns, you will need to explain the reason in more detail in your letter as to why you can not provide these documents (i.e. Ive been unemployed for 6 months and have not been able to find work) Note- realize that if you dont have tax returns, then the bank will ask for Extension Filings. So, if you dont have Extension Filings either, explain why in this letter (i.e. I havent filed my tax returns for the past 2 years and I failed to file extensions as well) In addition to the letters you will need to complete the Lack of Evidence Document enclosed in appendix of this package.


4. Bankruptcy V You could also mention I dont want to have to file bankruptcy.





                      Please see the following page for Hardship Letter Examples














                                     Sample #1 Hardship Letter



            *{Remember, YOU must handwrite your own Hardship Letter to the Lender (s)}*

                                     **{ A letter for Each Lender MUST be written}**






To Whom It May Concern:


I have been unable to make my payments on my house, and I am now facing foreclosure. My inability to keep u with the monthly payments is the result of

In spite of my current financial difficulties, I expect that it will only get >. However, I am not in a position to continue making my mortgage payments. This was not at all what I intended but I have come to the conclusion that this is my only option. Your help and consideration in this matter are very much appreciated.




John Doe (actual signature)




                                    Sample #2 Hardship Letter


                    *{Remember, YOU must handwrite your own Hardship Letter to the Lender (s)}*

                                          **{ A letter for Each Lender MUST be written}**





Dear Sir or Madam,


I am writing to ask for your help. Circumstances beyond my control recently caused my life to change. A year ago when I bought my dream home, my kids and I were happy to be living in and everything was going well. A couple of months ago K.[Give them a story of what happenedKlost jobKsomebody became ill, mom deeded you in another state, business failed, kids having problems in school, needed helpKthe more details the better, just tell your story how it is.]


The bottom line is I cannot continue to make the payment on my house any longer. I have tried many different things to sell my house and pay off the money I borrowed from you. I talked to some real estate agents, but they said since I owed more than what the house is worth that they would not list it for me. I called some investors that told me they couldnt buy the home because there was no equity in it and it required work. [Or rather, you can say:] The house has been listed for months and all the offers received were much below the payoff amount of my loan.


I was on my way to file bankruptcy when fortunately this buyer suggested that you, my lender, may consider a Short Sale or reduced payoff. Please, please, please work with this buyer. They/he/she is the only person who has given me any hope and any reason not to file bankruptcy. I am a responsible person who has always paid my bills and I am afraid of what will happen if this does not work. Your consideration is GREATLY appreciated!




Jane Doe [signature]

Jane Doe [printed name]






Sample #3 Hardship Letter


                    *{Remember, YOU must handwrite your own Hardship Letter to the Lender (s)}*

                                          **{ A letter for Each Lender MUST be written}**



To Whom It May Concern:


I purchased the property at 123 Main Street in March 2006. At that time, I had just started my own antique resale business, which had great promise for generating profits capable of supporting my mortgage. Unfortunately, sales were slow, which I attribute to great declines in tourism after gas prices skyrocketed. I ran out of money, and began working as a waiter to make ends meet. At the same time I was redoubling my efforts in my own business, but to no avail. After struggling for months to make my expensive mortgage payments, I had no choice but to put my house on the market. In August of 2006 I put my home up for sale by owner at an original listing price of $210,000. The only people to look at the house ran when they saw the extensive damage to the pool and the severe water damage from a leaking roof that had long needed a replacement. I lowered the price, but still had no takers. Over the next couple of months I lowered the home price three times, finally settling at $170,000. This price was the lowest I could list the house at and still afford real estate agent commissions to be deducted, although it leaves me with no profit. The home still has no offers. I am working with a Real Estate agent now, who is listing my house and promises to push it to get it sold quickly. I believe that using an actual agent will ensure that the home sells promptly.


I love my home, but I also understand that at this point, I cannot afford it. I am a single parent, now working as a waiter to survive. My financial situation cannot sustain a home mortgage of nearly $2000.00 per month. I would like nothing more than to sell my home, avoid foreclosure, and salvage my credit. This is my main concern. I know that a foreclosure on my record will affect me for years to come. I would ask that you please assist me in avoiding this. Please accept this offer as payment in full. My attorney has advised me to file bankruptcy, but I prefer to avoid further destruction of my credit. I just want to move on and start over.


I deeply appreciate your help and understanding in this matter. If you have any questions, or need anything further from me, please contact me personally.


Kindest regards,

Home Owner Name













Financial Statement




Date: __________________                                    Property Address: ___________________________________



Borrower: ________________________________ Co-Borrower: _______________________________________


                Employed?: Yes No                                                        Employed?: Yes No


Place of Employment? ______________________ Place of Employment? _____________________________



Mailing Address: ___________________________ Ttl No. of Persons in Household? ______________________







Type:                                                                           EstimatedValue:


Home Checking Account(s)

Other Real Estate



Other Real Estate IRA/Keogh

Other Investments Stocks/Bonds/CD's

Automobile (# ___ ) Other

Total Assets:






Monthly Income:



                                                      Home:                                Other Income:






Total Income:





Monthly Expenses:

                                                                                                                  Est.               Past Due

Category              Description       Monthly Payment     Balance Due       Value            (Y or N)    If yes, # of Months

Subject Property 1st Mtg.

                             2nd Mtg.


Other Properties   Other Mtg.

                             Rent Paid

                             Dues HOA


Automobile           Auto 1/Lease

                             Auto 2/ Lease





Other Loans         Student Loans

                             Finance Co.



Credit Cards         Visa







Utilities                  Elec./Heating






Insurance              Health & Dental



Medical (No Cov.) Doctor/Dentist






Food Family


Support                 Alimony


                              Childcare Day Care


Other (specify):


Total Monthly








Authorization for the following Mortgage Company(s) to release Information             To the listed Real Estate Agents/Brokers(s)/Financial Consultants





The undersigned, am/are the owner(s) of that certain real property commonly known as



(Property address)


I(We) am(are) the Borrower(s) on the loans listed below and have previously requested and authorized said lender(s) to provide all relevant information pertaining to such loan(s) to Brian Davis Associate of Keller Williams Realty.


________________________________________,                ____________________________________,

(Name of 1st mortgage lender)                                                 (Loan number)


________________________________________,                ____________________________________,

(Name of additional mortgage lender)                                     (Loan number)


I (We) authorize and instruct the above mentioned Lenders to promptly deliver ANY and ALL information requested by my (our) Real Estate Broker(s)/Agent(s), Financial Counselor(s) and/or authorized representative(s) as follows:


Name: Brian Davis


Company Name: Brian Davis of Keller Williams Tri-Valley Realty


Address: 2300 First Street #216, Livermore CA 94550


Ph. No: Office: (925) 998-3078 E-Mail: [email protected]


I(We) understand and agree that this Authorization is made for the purpose of exploring the possibility of completing a Short Sale of the above referenced property, and that I(We) and my(our) representative(s) designated above will be solely responsible for negotiating a Short Sale transaction with the lenders. I (We) further understand and agree that Brian Davis Keller Williams Tri-Valley Realty, is acting merely as the coordinator for communication and the exchange of information, that it makes no representations on the advisability of a short sale, and that I(We) have been advised to seek counsel from a qualified professional (tax attorney or certified public accountant) for the determination of any tax consequences related to a Short Sale transaction.


X ___________________________________/ _______________/ ______________ / ____________________

   Borrower (Sign & Print)                                   Date:                        D.O.B.                    Last (4) off SS#


X___________________________________ / _______________ / ______________ / ____________________

   Co-Borrower (Sign & Print)                             Date:                         D.O.B.                    Last (4) of SS#













                                      Please Do Not Contact Me by Phone



First Loan #: ______________________            Second Loan #: ______________________



First Lender: ______________________            Second Lender: ______________________



Property Address: ___________________________________________________________



According to the Truth in Lending law, I have the right to request that you, my lender, not contact me by phone regarding my loan being in default. I do not wish to speak to any collection agents about this account. Please make any future communication with me in writing or if you must speak to someone regarding this account, please talk to my Real Estate.




Brian Davis

Keller Williams Tri-Valley Realty

2300 First Street, Suite #216, Livermore CA 94550

Ph. No. (925) 998-3078 Email: BrianLDavis.com


Of whom is assisting me in selling my home. The information obtained by my agent is to be used for the purpose of facilitating the resolution of my foreclosure and or Short Sale.







________________________________                        _________________

Printed Name                                                                  Date



Last (4) of SS#: ______________________________ D.O.B.: _____________________







________________________________                        _________________

Printed Name                                                                  Date



Last (4) of SS#: ______________________________ D.O.B.: _____________________




                           Advice to Seek Counsel




The undersigned parties hereby acknowledge that they have been advised to seek counsel and have been given ample time and opportunity to review their tax status, present and future with their attorney or accountant of choice for review of approval and determination of adequacy for the protection of their interests. No representation has been made by Brian Davis of Keller Williams Tri-Valley Realty, its agents, brokers, Title Company and their Escrow Officers as to legal sufficiency or effect or tax consequences of their Short Sale transaction. Furthermore, all parties indemnify and hold Brian Davis of Keller Williams Tri-Valley Realty, its agents, brokers, Title Company and their Escrow Officers harmless as to any responsibility or liability in connection with herein.




X ______________________________________________/ _________________

Borrower (Sign & Print)                                                             Date:




X ______________________________________________/ _________________

Co-Borrower (Sign & Print)                                                       Date:




























Glossary of Foreclosure Terms

*       Acceleration Clause - A provision that allows the lender to demand the entire balance of the mortgage loan when the borrower fails to make one or more installment payments.

*       Affidavit - A written statement, usually given while under oath or in the presence of a Notary.

*       Annual Percentage Rate (APR). The annual interest rate covering the interest and other costs. The Truth in Lending Act requires announcement of APR by lenders.

*       Appraisal - The process by which a licensed person gives an estimate of property value.

*       Appreciation - The difference between the increased value of the property and the original value.

*       Assignment - The transfer of property to be held in trust or to be used for the benefit of the creditors (lenders).

*       Automatic Stay - An automatic Court ordered delay in Foleclosure proceedings caused by the homeowner filing for Chapter 7 Bankrupttcy protection. 

*       Balloon Payment - Large installment payment required at the end of the term of the mortgage note to pay off the entire mortgage balance.

*       Bid - The amount for a foreclosed property for sale at auction.

*       Certificate of Sale - A document issued to the winning bidder at a foreclosure sale stating their rights to the property once the borrowers redemption period has expired.

*       Clear Title - A title that is not burdened with defects.

*       Credit Bid - A bid on behalf of the lender at a foreclosure sale. The bid amount must be less than or equal to the balance of the loan in default.

*       Decree - A judicial decision.

*       Deed - A signed document that shows ownership in property and allows the transfer ownership of property from one party to another.

*       Deed-in-lieu of Foreclosure - A voluntary transfer of title by the borrower to the mortgage company to avoid foreclosure action.

*       Deed of Trust - An instrument signed by a borrower, lender and trustee that conveys the legal title to real property as security for the repayment of a loan. The written instrument in place of mortgage in some states.

*       Default - A mortgage is in default when the borrower fails to make the payments as agreed to in the original promissory note.

*       Deficiency Judgment - A judgment against the borrower for the balance remaining after the property is sold at auction or foreclosure sale.

*       Encumbrance - Mortgage, lien, tax, or any restriction on the use of land.

*       Equitable Title - The present right to possession with the right to acquire legal title once a preceding condition has been met.

*       Fair Market Value - The price a property would sell for on the open market.

*       Fee-Simple - Common term used to indicate complete legal ownership of a property.

*       FHA - Federal Housing Administration under U.S. Department of Housing and Urban Development (HUD).

*       Foreclosure - The forced sale of property pledged as security for a debt that is in default.

*       Free & Clear - Ownership of property free of all indebtedness.

*       Grace Period - Period between the due and the overdue date during which no late payment penalty applies to the mortgage payment.

*       Hazard Insurance - Insurance against the destruction of the property.

*       Judicial Foreclosure - A foreclosure that is processed by a court action.

*       Lien - A charge upon real or personal property for the satisfaction of a debt.

*       Legal Description - A formal description of real property so that one can locate it by reference to government surveys or approved recorded maps.

*       Lender - A person who lends money for temporary use on condition of repayment with interest (i.e., the bank, mortgage company, etc.).

*       Lis Pendens - A recorded notice of pending lawsuit.

*       Mortgage - A written pledge of property that is used as security for the repayment of a loan.

*       Non-judicial Foreclosure - Non-judicial foreclosure is when a power of sale clause exists in a mortgage or deed of trust. A "power of sale" clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of their default.

*       Notary - A public officer licensed by the state to attest to and certify the validity of signatures of others. A Notary is often referred to as a Notary Public.

*       Notice of Sale - A notice giving specific information about the loan in Default and the proceedings about to take place. This notice must be recorded with the county where property is located and advertised as stated in the security document or as dictated by state law.

*       Personal Property - Property other than real property consisting of things temporary or movable.

*       Posting - To publish, announce or advertise by physically attaching a notice to an object.

*       Postponement - Postponement means to put off to a later time. In the case of a foreclosure sale, this is generally done by announcement at the original sale or by posting notices establishing the new date and time the foreclosure sale will take place.

*       Right of Redemption - A borrower's right to reacquire property lost due to a foreclosure. This right allows the owner to recover property lost to a foreclosure judgment, or sold after a foreclosure sale, within a certain period of time. The redemption period varies among the states.

*       Request for Notice - A recorded document requiring a trustee send a copy of a Notice of Default or Notice of Sale concerning a specific deed of trust in foreclosure to the person who filed the document.

*       Short Sale - A sale where the lender will agree to accept less than the full amount of the mortgage. This allows you to sell the house to an investor or other buyer for a good price, while the lender recovers the bulk of the amount due without having to pursue foreclosure proceedings.

*       Subject To - The purchase of a property with an existing lien against the title without assuming any personal liability for the liens payment.

*       Title - The instrument that is evidence of a person's right in real property (i.e., a deed).

*       Trustee - A neutral party who advertises the foreclosure property for sale and conducts the auction to sell said property to the highest bidder.

*       Trustee Sale (Sheriff Sale) - An auction of real property conducted by a trustee. Also known as a Sheriff's Sale.

*       Upset Bid - A recorded bid placed after a foreclosure sale has ended that is higher than the highest bid received at the actual foreclosure sale.

*       Writ - An order or mandatory process in writing issued in the name of a court or judicial officer commanding the person to whom it is directed to perform or refrain from performing a specified act.



A short sale can take 45-120 days, on average, to close. The following is a timeline with regards to the short sale process. Every bank is different an has their own internal short sale process. The following is the most typical process.


Short Sale Process and Timeline;


YnAuthorization and Financial Documents are obtained from the Seller

We cannot start negotiations without a complete file. All documents must be provided before the file will be accepted.

Y Property is listed

Keys are obtained from Seller.

Lockbox is placed.

Pictures are taken.

Sign is placed.

Y Payoffs and Prelim are ordered

Y Bank(s) are contacted to verify foreclosure date, if any

Y Offer is received

Earnest money is deposited.

Short sale package is created and sent to the Bank.

Fax confirmation is received.

Y Bank(s) are contacted to verify receipt of short sale proposal

This is 2 days from the original send date of the short sale proposal.

Y Bank(s) are contacted to verify that a Negotiator has been assigned to the file

This is 1 week from date of confirmation of Bank receipt of the short sale proposal.

If file has not been assigned to a Negotiator; a call is placed weekly until a Negotiator is assigned.

Y Once negotiator is assigned, biweekly calls are made for status updates

All calls are noted and info received are noted in our database.

Notes may be viewed by Agents, Sellers, and other approved persons. A Team member will send info regarding how to access the file notes via our database. This does not allow full access to the file, just the file notes.

Y Bank orders a BPO or interior value

This will assist the Bank in determining whether or not the offer is within fair market value.

This process can take 2-3 weeks on average.

The Bank is contacted weekly until verification of values have been received.

Y The file goes into review with the Negotiator

This process typically takes between 7-30 days on average.

We call the Bank weekly for an update.

Y Bank either approves, at Negotiator level, or counters offer

If approved at Negotiator level; the offer then goes to the Investor for final approval. Usually takes 1-30 days for a response. Investor may counter offer as well.

We call the Bank weekly for an update.

Y Bank submits final approval letter, if Investor has given final approval

Y Close of Escrow begins

Inspection and appraisal are ordered.

Finalizations of lender underwriting conditions are met.

Documents are ordered.

Y Signing, funding, and close of Escrow!