What is a real estate short sale?
A real estate short sale occurrs when the lender agrees to allow the home to be sold for less than the existing loan or mortgage balance.
The mortgagee would accept less than the loan amount in order to avoid a foreclosure proceeding.  This short sale would result in
a substantially discounted purchase price for the buyer of the home. 

How late in the foreclosure process can you start a short sale?
Foreclosure procedures vary from state to state.  Once the homeowner is unable to make on time mortgage payments it is recommended
that you get advice on your options.  Some foreclosures can proceed as quickly as 35 days from the date the notice to the borrower is filed. 
For that reason, time is of the essence and you should allow a window of no more than 60 days to effectuate a lender approved short sale.

Will a lender allow a real estate short sale when the seller/property has equity?
If the home has equity, the lender may choose to continue with the foreclosure procedure and take possession of the property. 

What documents are necessary  to proceed with a short sale?
The necessary documents vary from lender to lender.  However, most lenders require recent paystubs, bank statements, a financial
statement, a hardship letter detailing the reasons a short sale is needed.  A signed, valid purchase and sales contract, preliminary
HUD-1 settlement statement and a preliminary estimate of proceeds to the lender. Some lenders require more documentation.

Will the seller's credit rating be affected if they allow a short sale on their property to occur?
It is up to the individual lender to decide how they will report to the credit agencies.  However, most lenders will report that the account was
paid and add that is was settled for less than originally owed.  The good news is that it is much better to have this statement rather than a
foreclosure which stays as a negative item for up to 7 years and has a greater adverse effect on the credit score.  In some cases as much
as 250 points.

Will a lender allow the seller to make a profit on a short sale?
The simple truth is that most homes do not have equity until the short sale occurs.  Usually the current loan balance will be higher than the
selling price of the home.  The answer is clearly no.  The lender is forgiving a substantial amount of the mortgage and will not allow the
seller to make a profit.

If a seller is in bankruptcy, will that affect the short sale?
The rules of bankruptcy do not permitt an attempt to collect on a debt during the bankruptcy filing.  Some lenders will still negotiate, however,
it is not advisable to file for bankruptcy if trying to negotiate a short sale.

Will the lender or bank require an appraisal on the home in a short sale?
A request for an appraisal varies from lender to lender.  However, most require an appraisal or variance of one.  The lender will need some
formal assessment of the value of the home in order to make a decision to accept or deny the short sale offer

Are there tax implications in the short sale?
This varies from lender to lender.   As a short sale represents a loss for the lender, they can report the amount lost as a debt forgiveness to the seller.  However, under the recently enacted Mortgage Forgiveness Debt Relief Act of 2007, taxpayers may exclude debt forgiven on their principal
 residence if the balance of their loan was less than $2 million.

Why would a lender allow a short sale to occur?
The foreclosure procedure is very expense for the lender and it makes more financial sense to allow the home to be sold for less than to
acquire another property.  The banks are in the business of loaning money, not acquiring property.  In addition, the current market conditions are not favorable to the lender foreclosing and selling a property.