Short Sales in Houston: How They Work and What Happens to the Rest of the Loan

Owing more than your house is worth is a trapped feeling. You can't sell normally without bringing money to closing, and you may not be able to keep up the payments either. A short sale is one way out.

What a short sale is

The lender agrees to accept less than the full loan balance so the house can be sold. Every lienholder on the property (first mortgage, second mortgage, home equity line) has to approve.

How the process works

• Gather a hardship letter, income and bank statements, and tax returns. The lender wants to know why you can't pay.
• Find a buyer and sign a contract that's subject to lender approval.
• The lender orders its own valuation and reviews the file. This step often takes weeks to months.
• Once the lender approves in writing, you close at title.

What happens to the unpaid balance?

This is the most important part. The approval letter should say clearly whether the lender waives the remaining balance (the "deficiency") or keeps the right to collect it. Don't assume. Read it, and have an attorney read it. Forgiven debt can be treated as taxable income, so talk to a CPA too.

Short sale vs. foreclosure

• A short sale is usually easier on your credit than a completed foreclosure.
• You get some control over the timeline and move-out.
• But approval isn't guaranteed, and a foreclosure date can keep moving forward while you wait. Ask the lender to postpone the sale date while it reviews your file.

Other options worth comparing

A loan modification, a deed in lieu, or a Subject-To sale may fit better depending on your numbers and timeline. We buy Houston houses through short sales and can help you prepare the lender package. Call or text 832-866-FAST.