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Buyer's Guide to Short Sales

Considering Buying a Short Sale? Here is some information on what you need to know about the process.

What is a Short Sale?

A short sale is a transaction from which the net proceeds of the sale do not cover the liens (mortgage, etc) against the property. A short sale requires bank approval since the bank will not be fully paid; generally sellers seeking a short sale must provide the bank’s requested documentation to prove a financial hardship. Banks often determine if the Sellers are imminently facing foreclosure when determining whether to approve a short sale. For Sellers, short sales have tax and credit consequences, so CIR requires our clients to seek advice from legal and tax professionals before seeking a short sale.

How long will it take to buy a Short Sale, or for Short Sale approval?

Since short sales require bank approval, the process can be longer than a traditional purchase. Timeframes vary depending upon a number of factors, including the status and degree of the seller’s hardship, the number of liens against the property, and the lenders backlog. When writing a short sale offer, the timeline for your due diligence does not begin until the short sale has been approved in writing. We typically tell our clients to be willing to wait 60 days for short sale approval, and an additional 30 days (depending upon what is agreed upon in the contract) for your due diligence, for a total timeline of 90 days.

Why is the price so low?

Sometimes Sellers list their homes under market value in order to attract immediate interest from Buyers. A quick offer gives the Seller something to submit to the bank to get the process started. While this may seem like a great deal, banks are generally aware of the market value of the property and more often that not an initially low asking price generates multiple offers on the property, sometimes well over the list price.

Keep in mind that banks do not approve all offers. The offer must be close to the market value of the home to be considered by the bank. Therefore, if the price seems too good to be true, remember that it probably is!

Short Sale vs. Traditional Sale

Compared to a Traditional Sale, a Short Sale:

  • Can take much longer to buy than a traditional sale
  • Are often sold as is
  • Is not approved when the Seller accepts your offer
  • Has many more variables
  • Can be less expensive

Both a short sale and a traditional sale:

  • Are sold by the homeowners, not a bank
  • Must provide detailed disclosures
  • Offer Homeowners Title Insurance Policies

Where does a Short Sale get its name if it takes longer than a Traditional Sale?

A short sale gets its name from the short payoff to the bank. The bank holds a mortgage that is more than the market value of the home, and therefore there is a deficiency in the payoff at close of escrow. The term short does not refer to the escrow period, but instead to the amount of money paid to release the bank’s lien.

For more information on Short Sales, contact Kate either at (619) 435-0145 or

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