What's a Short Sale?

What You Need to Know About Buying a Home in a Short Sale

Buying a home in foreclosure might sound like a steal, but it can be a gamble. You’ve probably heard horror stories or have seen just how bad it can be when you drive by boarded up homes with the daunting red “foreclosed” sign swinging in the yard. Still, the idea of finding a diamond in the rough and getting a “deal” on your next piece of real estate is hard to resist. That’s where a short sale comes in—a lesser-known alternative that can offer opportunity with (slightly) less drama. Here's what you need to know if you're thinking about buying a short sale property.

What is a Short Sale?

A short sale happens when a homeowner sells their property for less than what they owe on the mortgage, and the lender agrees to accept that lower amount as full repayment. It’s a way for homeowners to avoid foreclosure, and for lenders, it’s a faster, less costly resolution.

For buyers, a short sale can be an opportunity to purchase a home below market value—but it’s not exactly a quick or easy process. The bank has to approve the sale, which can add weeks or even months to the timeline.

Short Sale vs. Foreclosure: What’s the Difference?

Both short sales and foreclosures happen when a homeowner can no longer keep up with mortgage payments—but how they unfold are very different, especially for buyers.

• A short sale is initiated by the homeowner and carried out with the lender’s cooperation. It’s considered a “good faith” effort—meaning the seller is proactively acknowledging their financial difficulty and working with the lender to find a solution that avoids foreclosure. In return, the lender may agree to accept less than what’s owed and mark the debt “paid in full,” often without pursuing a deficiency judgment. Because the seller is still involved in the process, they’re typically still living in the home, keeping it maintained, showing it to prospective buyers, and avoiding the kind of neglect or damage that sometimes comes with a foreclosure.
  

• In contrast, a foreclosure is a legal action initiated by the lender when payments have stopped and no agreement has been reached. The homeowner is often evicted, and the property may sit vacant for months—sometimes in poor condition or subject to vandalism—until it's resold by the bank.

In short, a short sale is a more orderly and cooperative process, while a foreclosure is the last resort.

Why Would Someone Buy a Short Sale?

Although the home might need considerable improvements, there are a few compelling reasons to consider buying a short sale: 

• Lower Purchase Price: Short sale properties are often listed below market value. 
  

• Room to Renovate: Even if the home needs updates, the savings may give the buyer flexibility to renovate or customize.
  

• Less Competition: While demand for traditional listings remains high in many areas, short sales tend to attract fewer bidders, giving the buyer a better chance at securing the property.
  

• Favorable Financing Options: In some cases, lenders eager to resolve the property’s outstanding debt may offer more flexible financing terms, or work with buyers to close quickly. However, note that this varies by lender and market conditions. With rising interest rates in recent years, certain lenders may be more motivated to move distressed properties off their books faster.

That said, short sales aren’t always the fixer-upper dream. Be prepared for the reality that buying a short sale can come with risks. Inspections, repair costs, and lender delays all need to be factored into your plan.

How to Buy a Short Sale

Purchasing a short sale takes time and there are many steps in the process that require careful consideration, even beyond that of a traditional real estate purchase. Here’s what to expect:

1. Work with Experienced Professionals: Short sales are complex—working with a real estate attorney and an agent who understand the process is essential.

2. Do Your Due Diligence: Home inspections, title searches, and lien checks are critical. There may be additional claims on the property.

3. Prepare for Delays: Unlike traditional transactions, approval from the lender can take time—sometimes months.

4. Negotiate Smart: The seller may be motivated, but the lender has final say. You'll need a strong offer and clear communication throughout the process.

Short Sales in Today’s Market

While short sales were more common in the years following the 2008 housing crisis, they’ve seen a resurgence in certain markets due to fluctuating home values and interest rate hikes in recent years. Rising inflation, job market shifts, and regional price corrections have made short sales relevant again—especially in areas where homeowners are finding themselves underwater on their mortgage.

If you're considering this route, it's more important than ever to have a legal team that knows the ins and outs of distressed property transactions.

Ready to Explore Your Options?

Short sales aren’t for the faint of heart, but with the right strategy—and the right legal support—they can present a valuable opportunity. Whether you're a first-time buyer, investor, or just exploring creative ways to enter the market, we're here to guide you every step of the way.

Anselmo & Wojcicki, LLP is a leader in residential real estate transactions, including short sales and other non-traditional property purchases. Let our experienced attorneys help you navigate the process with confidence. Contact us today to learn more!

About Anselmo & Wojcicki, LLP

Anselmo & Wojcicki, LLP is a multi-disciplinary law practice based in Schaumburg, Illinois, specializing in real estate, estate planning, tax planning, business formation, and the sale and purchase of businesses. Our commitment to our clients and our values set us apart from the crowd. Our team of legal specialists has a wealth of experience and expertise to help you meet your legal needs. We are dedicated to providing quality service and building lasting relationships with our clients.