How to Get a Short Sale Approved

How to Get a Short Sale Approved 

Let’s be real—owning a home isn’t always sunshine and backyard barbecues. Sometimes it feels more like dragging a boat anchor through quicksand—especially when you’re upside down on the mortgage and falling behind on payments.

In those cases, a short sale might be your best bet. It allows you to sell your home for less than what you owe the bank, avoid foreclosure, and start fresh. But before you jump in, you’ve got to know what you’re doing—or at least who can help you get it done.

This article walks you through the short sale process step by step, in plain English. No jargon. No fluff. Just real steps based on real deals.

Step 1: Ask for Help

The first thing you need to do is reach out to someone who specializes in short sales. This could be a title company, a real estate attorney, or a short sale processor. You want a professional who knows the process, can work with your lender, and isn’t learning this stuff from YouTube.

Why does this matter? Because most of the work in a short sale is paperwork—and how that paperwork gets submitted can make or break your deal. Having the right team early on can save you months of frustration.

Step 2: Gather Your Paperwork

Now it’s your turn to gather all the documents the bank will ask for. Think of this like your financial truth-telling session.

Here’s what you’ll typically need:

• Signed disclosure forms (your short sale team will give you these)

• A hardship letter explaining why you can’t keep up with the mortgage

• Supporting documents like:

  • Layoff notices

  • Divorce decrees

  • Medical bills

  • Death certificates

• Mortgage statements for all loans on the property

• 4506-T (tax return transcript request form)

• Most recent pay stubs (or profit & loss statements if self-employed)

• Last 2 months of bank statements (all pages)

• Last 2 years of tax returns and W-2s

• Any collection or foreclosure letters

• Any notices of sale dates (if you’re already in foreclosure)

Yes, it’s a lot. But getting it all submitted at once increases your chances of approval.

Step 3: Bring in a Real Estate Agent

Your real estate agent isn’t just there to slap a “For Sale” sign on your lawn. They play a critical role in the short sale.

Here’s what they’ll need to provide:

• A fully executed listing agreement

• A printout from the MLS

• A signed purchase offer from a real buyer

• Proof of the buyer’s funds or a mortgage pre-approval letter

• A comparative market analysis (CMA)

• A list of needed repairs and their estimated cost (from a contractor, if possible)

• Photos showing the current condition of the property

Banks want to know this is a real sale, not something thrown together last minute. The more professional the package, the faster they’ll take it seriously.

Step 4: Submit Everything Together

This is where things can go sideways if you’re not careful. Your team should send in the entire package all at once—not piece by piece. Lenders hate incomplete files. If they have to keep asking for missing forms, your file goes to the back of the line.

Make sure the following are included in a single submission:

• Seller documents

• Agent documents

• Buyer’s offer and proof of funds

• Financial and hardship info

Everything should be clean, clear, and ready to go.

Step 5: Sign Third-Party Authorization

You’ll need to sign a form that allows your short sale team to talk directly to your lender on your behalf. Without it, they can’t do much.

This form usually includes your name, property address, loan number, and the names of the people or company authorized to speak to the bank.

Step 6: Complete a Financial Worksheet

Think of this like a budget worksheet that shows your income, expenses, and debts.

You’ll list:

• Your income (job wages, rental income, social security, etc.)

• Your assets (cars, cash, bank balances)

• Your monthly bills (mortgage, insurance, credit cards, student loans)

• Any other liabilities or debts

The lender wants to see proof that you really can’t afford the home anymore. So be thorough and honest.

Step 7: Write Your Hardship Letter

This is your chance to tell your story. Keep it honest, simple, and emotional—but professional.

Explain:

• What happened that made you fall behind

• What steps you took to try to fix it

• Why you can’t continue paying the mortgage

• Why a short sale is the best solution for everyone involved

Think of it as your “why.” It doesn’t need to be dramatic, just truthful and clear.

Step 8: Review and Sign the Short Sale Agreement

This agreement outlines what your short sale processor or firm will do, how they’ll get paid (usually through the sale), and what your responsibilities are.

It should also make it clear that they’re not giving you legal or tax advice. You’re encouraged to consult with your own CPA or attorney if you’re unsure about potential consequences like a deficiency judgment or IRS form 1099-C (which reports forgiven debt as income).

Step 9: Stay in Touch

Once the package is submitted, don’t disappear.

Your lender might request:

• More documents

• Clarifications

• Access for a BPO (broker price opinion) or appraisal

Respond quickly. Delays can cause the buyer to back out or the file to get denied.

Step 10: Wait for Approval and Close

Now the lender will review everything and:

• Approve the short sale

• Counter the offer

• Or deny it (which means your team can repackage and try again)

If it’s approved, you move to closing like a regular sale. The lender gets paid, the buyer gets the house, and you get to walk away without a foreclosure on your record.

A Few Extra Tips

• Keep utilities on and the house in showing condition. A clean, functional home helps.

• Be honest and thorough with all your paperwork.

• Communicate often with your team and respond fast to requests.

• Consult a legal or tax expert if you’re unsure about anything.

A Note from My Own Experience

I remember back in 2008, I had 45 short sale listings—but not a single one got approved. Back then, banks were slow, stubborn, and just didn’t get it. But things are different now. Lenders don’t want the hot potato. They’ve learned their lesson, and many are much quicker to approve short sales today.

My team and I have been doing this for over 20 years. We’ve completed hundreds of short sale transactions, and we’ve seen every scenario under the sun. Whether it’s your first time going through this or your fifth, we’ve got the experience and systems to make it as smooth as possible.

Written by Jorge Vazquez – 20+ year real estate investor, licensed broker, and someone who’s been through the tough times and helped hundreds get through theirs.

Keep it consistent, stay patient, stay true—if I did it, so can you! Ready to connect and strategize? Contact me at http://graystoneig.com/ceo – Jorge Vazquez, CEO of Graystone Investment Group & its subsidiary companies and Coach at Property Profit Academy.

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Meet Cody Bergstrom, Your Expert in Finding Deals

I’ve spent 20+ years helping investors close real deals—not just listings. As a licensed MLO, I’ve funded millions and built deep connections across Florida’s investor network.Connect with Cody at https://graystoneig.com/cody

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Hi, I’m Lisa-Kaye Price, Real Estate Lending Specialist at Graystone. With 20 years as a licensed Realtor® and MLO, I help investors lock in smart financing for high-impact deals.  Connect with Lisa at https://graystoneig.com/lisa-kaye-price

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