- Short sale approved means that your mortgage lender is willing to allow you to sell your home for less than the mortgage you owe them. The sale of the house does not pay off the mortgage loan and closing costs; the mortgage is greater than the selling price.
- Lenders will consider short sales for many reasons. When a bank has to foreclose on a property, the bank has to maintain the property (pay utilities and make repairs) until it sells. Monies that could have been put to use to generate new loan fees have to be set aside to cover the delinquent loan and maintain the property. Also, poor loans limit the lender's ability to sell loans on the secondary market, a good source of income.
- The documentation for a short sale sell is detailed. You must have a letter explaining why you need the short sale; a copy of the purchase contract and listing agreement; proof of income and assets, and copies of the last two years of federal tax returns.
- Prepare for a long wait. The short sale process can take a long time. It can be as little as several weeks to months for your lender to review the package. The bank can approve the short sale, make counter offers or reject it.
- Any debt that is forgiven due to the short sale can be excluded from income you report on your federal income tax return. The Mortgage Relief Act and Debt Cancellation Act covers loans from 2007 to 2012. There are criteria that must be met in order to qualify.