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When You Owe More Than the Property Is Worth · Short Sales

How a California short sale works when you owe more than your property is worth.

Owing more than your property can sell for is a hard place to be. A short sale is one option. It is a sale for less than you owe, with your lender's written approval. You ask your lender to take the sale money instead of holding an auction. Some debt could still be left after the sale. Ask a lawyer of your own if that could happen to you. This matters most with a commercial loan or a personal guarantee (a promise to repay the loan yourself). Once you hire us as your agent, we represent you — not your lender.

Request a free callTake the 1-minute checkCall Gay-Lynn: (562) 858-7065Call Francisco: (213) 880-8107

Plain-Language Overview

What a short sale is and how fees and approvals work.

Here is how a short sale works. We list your property for sale. We find a buyer who can pay. We send the buyer's offer and your financial forms to your lender's mortgage-help team. Lenders often call it loss mitigation. That team must approve the sale in writing.

How Costs Work

Fees and sale costs in writing before you sign

Our first review is free. We charge no upfront fees. Before you sign anything, we explain in writing how we are paid and what sale costs to expect.

  • No upfront fees: Charging advance fees on a home in foreclosure is illegal in California. We charge no upfront fees on any home or commercial property.
  • Paid at closing from the sale money: Closing costs are normally paid out of the buyer's price. So are agent commissions. This happens in escrow. Escrow is the neutral company that holds the money and papers until the sale closes. Your lender must approve these costs in writing first.
  • Written estimate first: We write up an estimate of the money left after the sale. It is called a net sheet. It lets you and your lender see every cost in writing.
California Rules

Written Lender Approval & Legal Review

A short sale needs your lender's written approval. California Code of Civil Procedure §580e has rules for 1–4 unit home short sales. Commercial loans have different rules. If your lender approves, it sends an approval letter. Before you close, always have a lawyer of your own and a CPA review it. A CPA is a licensed tax accountant.

Lender Alternative

How a Short Sale Compares to a Deed in Lieu

Another option is a deed in lieu. That means giving the property back to the lender instead of an auction. Many lenders will not take a deed in lieu if there is a second loan or lien. A lien is a debt recorded against the property. Many lenders also ask you to try a sale first. The lender decides whether to accept a deed in lieu.

We are real estate licensees, not a law firm, and we don't give legal or tax advice. If you need legal advice, we can refer you to an independent attorney.

Step-by-Step Short Sale Process

How we coordinate a short sale from start to finish.

A short sale means paperwork with your lender's mortgage-help team. We put the file together and keep track of it with you.

  1. Step 1: Check loan payoff amounts, liens, and market value

    We look at your first loan and any second loans or liens. We also look at recent sales near you. This shows if a regular sale can pay off what you owe. If it cannot, you may need a short sale.

  2. Step 2: Prepare your lender permission form and package

    You sign a form that lets your lender speak with us about the sale. We help you gather the lender's required financial forms.

  3. Step 3: List the property and send a real purchase offer

    We market the property. We get a real purchase offer from a buyer who can pay. We send the contract and the written cost estimate to your lender.

  4. Step 4: Lender value check and written approval letter

    The lender checks what the property is worth. Then it decides whether to send a written approval letter. You review the letter with a lawyer of your own or a CPA. After that, escrow closes.

What Happens Next

What happens next after a short-sale package is sent?

Some lenders take longer than others to review a file. Keep these rules in mind while you wait:

  • Sending a short-sale offer or opening escrow does not stop or pause an auction by itself. Only your lender, the trustee, or a court can change a sale date. If your property is a home with 1 to 4 units, you have a right of your own. It works with any real estate broker licensed in California, not only with us. The listing must go on a public marketing site. You must send your signed listing agreement to the trustee yourself. It must arrive on time and in the way the law says. Then the trustee must delay the sale, one time only (Civil Code §2924f). The full steps are on our FAQ page.
  • Some owners may have other legal rights to ask for the sale to be delayed. To find out, ask a lawyer of your own or the trustee. The trustee is the company that runs the sale. Its name is on your notice of sale.
  • We follow up with your lender's mortgage-help team. That way your file does not stall over a missing form.

Short Sale California · Common Questions

Questions about short sales in California.

How does a short sale in California work when I owe more than my property is worth?

A short sale is a sale for less than you owe, with your lender's written approval. First, you list the property with a real estate agent. Next, you get a real purchase offer from a buyer. Then you send the offer and your financial forms to your lender. The sale can close only if your lender approves it in writing. Some debt could still be left after the sale. Ask a lawyer of your own if that could happen to you. This matters most with a commercial loan or a personal guarantee.

How do fees and sale costs work in a California short sale?

Our first review is free. We charge no upfront fees. Before you sign anything, we explain in writing how we are paid. We also explain what sale costs to expect. In a short sale, broker commissions and closing costs are normally paid from the buyer's price at closing. Your lender must approve these costs first.

How does California Code of Civil Procedure §580e apply to home short sales?

California Code of Civil Procedure §580e covers 1–4 unit homes. It sets rules for any part of the loan still unpaid after a short sale. These rules apply when the lender agrees to the short sale in writing. Ask a lawyer of your own whether any debt could remain. This matters most with a commercial loan or a personal guarantee. Before you close, also ask a CPA about taxes. A CPA is a licensed tax accountant.

Talk With Us · Free First Call

Want to see if your property fits a regular sale or a short sale?

Let's compare what you owe with recent sale prices near you. Plain answers, no pressure.

We are real estate licensees, not a law firm, and we don't give legal or tax advice. If you need legal advice, we can refer you to an independent attorney.

Request a free callTake the 1-minute checkCall Gay-Lynn: (562) 858-7065Call Francisco: (213) 880-8107
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