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Breaking Through the Hype of Short Sale

Lawrence D. Elliott
November 07, 2007
Okay, I know it's been in the news, usually when something is hyped, it can be distorted or misrepresented. So, whether you have a home in Pomona or a condo in Chino Hills, I will give my take on the short sale process. My take, by the way, is based on 18 years of real estate experience, which includes a lot--and I do mean a lot--of short sales!

Okay, here we go...

A short sale is when you sell your home and the lenders agree to accept a payoff which is less than the full amount of the borrower's debt, including the cost of the sale. Usually, it is used when a homeowner can no longer meet their obligations to the loan and is an alternative to foreclosure.

Recently, I was interviewed for an article in California Real Estate Magazine (which is available by clicking here). I warned of the numerous pitfalls you must avoid when your agent performs a short sale on your behalf. Avoid them, and you could be successful. Ignore them, and you could pay for it for years to come. There are legal and tax consequences that you need to be aware of before you sign the contract. The agent you select should be able to explain them to you thoroughly or direct you to the proper expert.

Here are some things to remember when considering a short sale:

Your financial situation had to have been caused by a genuine hardship. Usually illness or a loss of income is a valid reason. You will also need to provide proof of your financial situation, which could include a financial statement, tax returns, pay stubs, and bank statements.

You cannot net a dime after the sale. In fact, you may be asked to participate in the shortage if you have savings, retirement accounts, or other assets. You may also be required to pay for an appraisal.


You can't price the property at a low price just to make a quick sale. Lenders frown on this. The list price must be in line with the market. Fire sales are not allowed!

There may be a tax liability on the forgiveness of debt. For example, if the shortage is $20,000, it would be like someone cut you a check...for $20,000. Of course, there are exceptions. For this reason, you should consult a tax professional before performing a short sale.

Your lender could come after you on the shortage under certain situations. For example, you refinanced your home eight months ago and received $50,000 cash from the equity. Now, you want to perform a short sale because you can't make the payments. They really hate that!

If you were not truthful on your application, you could be S-O-L! That's Short Sale: Out of Luck, of course! That means if you claimed you made $6,000 a month and you only make $2,000...on a good month, that's fraud!

I could go on and on, but I think you get the point. This is not a responsibility to be placed in the hands of an amateur. And even if everything is done correctly, there is no guarantee the lender will grant you a short sale. But if done right, you increase your chances their answer will be a resounding "Yes!"

Additionally, with the market changes we are experiencing and the number of homeowners who are facing financial difficulties, short sales will most likely increase in the next few years. If you are faced with this choice, do yourself a favor. Select an experienced professional for the job!
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Lawrence D. Elliott


Lawrence D. Elliott is a nationally published author and storyteller who has been published in many popular national publications, including Chicken Soup for the Soul, the New York Times #1 Bestselling book series.

Lawrence wrote his first creative words in the sixth grade when a teacher gave him a writing assignment. He even create a rudimentary book, filled with illustrations. "Actually," says Lawrence, "they were the most pathetic looking stick figures youŽd ever see. But I was proud of my little book."

Heading into the seventh grade, Lawrence was among the earliest group of kids bused from his San Diego inner city neighborhood to a predominantly white school. The racial tensions were high. Often, there were fights before, after, and even during class. To make matters worse, he was identified as having a severe reading problem and was placed in a reading development class. Lawrence remember fighting back the tears of shame as he entered the separated bungalow classroom that first day. Then, Lawrence met Ms. Davila, the remedial reading teacher. She not only worked with him to improve his reading, but she learned Lawrence had a hidden gift. He loved to write. She helped Lawrence cultivate his new-found skill and gently guided him to discover how powerful it could be.

And in those tumultuous times, the fact that she was white had a lasting effect on his life. In her, was the example that there are good people everywhere, you just have to find them.

Throughout high school and beyond, Lawrence spent evenings scribbling his stories and attempting to get them published. The rejection notices mounted. But he was stubborn. However, eventually he was forced to realize that perhaps his talents would possibly be of used in other ways.

Through life, his path lead him through military service, the aerospace industry, even cleaning toilets when it was the best job he could get. Eventually, he landed in real estate where he had a 20-year career. But Lawrence continued to write, if only for his own enjoyment. He was also able to collect a host of characters along the way.

Then, in 2005 Lawrence had a near-death experience with a pulmonary embolism. It was then that he decided to brush off that dream he had as a kid. He decided to give publishing one more try.

In 2006, Lawrence had his first story accepted. In fact, he had four stories accepted! Fittingly, one of those earliest stories was about a teacher who, working with a black kid from the inner city with a reading problem, showed him that he had a hidden gift to share with the world. Since then, his stories have appeared in many popular books and periodicals.

Lawrence believes his life has been a wild ride, replete with twists and turns. There were good times, and bad times. Sometimes, very bad times. But he says he wouldn't trade it for all the gold in the world. "I'm excited," says Lawrence. "I'm also proud, grateful, and somewhat surprised that something seemingly unattainable has become a reality."

Lawrence feels his life has prepared him for this moment and he refuses to squander it.

Currently, he is editing two novels and hopes to have them submitted by mid-year. In addition to writing, Lawrence is also the sole caretaker for his wife Lisa. Their dog Lacie helps, too.


Recently Released:

"Unexpected Guests" published in A Chicken Soup for the Soul Christmas.

"Thank God for the Sandwiches" published in Letters to My Mother: Tributes to the Women Who Give Us Life--and Love.

"God, I'm Shvitzing!" published in Chicken Soup for the Soul in Menopause: Living and Laughing through Hot Flashes and Hormones.

"Well, I've Had A Plenty" published in My Dad Is My Hero: Tributes to the Men Who Gave Us Life, Love, and Driving Lessons.

"She Gently Opened Doors" published in Teacher Miracles: Inspirational True Stories from the Classroom.

"Learning to Share" published in Chicken Soup for the Soul Celebrating People Who Make a Difference: The Headlines You'll Never Read.

"A Visit From Arthur" published in Chicken Soup for the Soul Healthy Living Series: Arthritis.

To get autographed copies of his books, click here.