Short Sales & Foreclosures

As more homeowners exit forbearance, some will fall behind on their mortgages and many local markets will see a rise in distressed sale properties. The flow of distressed sales is expected to be a fraction of those during the Great Recession, but nonetheless, REALTORS® will need to develop new skills to respond on behalf of their clients and their communities.

Here you'll find more information on short sales and their challenges, the government's efforts to address these challenges, and tools to help you navigate the short sale process.

To check on the status of a particular short sale you should contact the lender. For a Freddie Mac loan, email shortsales@FreddieMac.com.

What is a short sale?

A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt.

Since a short sale generally costs the lender less than a foreclosure, it can be a viable way for a lender to minimize its losses.

A short sale can also be the best option for a homeowners who are “upside down” on mortgages because a short sale may not hurt their credit history as much as a foreclosure. As a result, homeowners may qualify for another mortgage sooner once they get back on their feet financially.

What challenges have short sales presented for REALTORS®?

The rapid increase in the number of short sales, and the short sales process itself present a number of challenges for REALTORS®. Major challenges include:

Limited experience. Many REALTORS® are new to the short sales process; a difficulty which is compounded by many lenders' lack of sufficient and experienced staff to process short sales. Even if the REALTORS® are experienced, most servicers are under-staffed and still not adequately trained, making negotiating a short sale particularly difficult.
Absence of a uniform process and application. Until HAFA guidelines were established, both short-sales documents and processes were lender-specific, making it very difficult and time-consuming for REALTORS® to become knowledgeable and efficient in facilitating these transactions.
Multiple lenders. When more than one lender is involved, the negotiations are much more difficult. In the past, second lien holders held up the transaction to exert the largest possible payment, in exchange for releasing their lien, even though in foreclosure they will get nothing. This practice is less common today.

As a result of these challenges our members have reported difficulties with: unresponsive lenders; lost documents that require multiple submissions, inaccurate or unrealistic home value assessments, and long processing delays, which cause buyers to walk away and harm distressed sellers.

Education

Take courses on short sales and foreclosures from NAR and its affiliates.

Short Sales & Foreclosures Topics

Featured

Short Sales and Foreclosure Resource (SFR®)

Turn distressed properties into opportunity, guiding buyers and sellers through complex sales.

Advocacy

What is the fundamental issue?

NAR continues to push the lending industry to improve the process for approving and expediting short sales. In a direct response to REALTOR® concerns, the Treasury Department developed the Home Affordable Foreclosure Avoidance Program (HAFA), to establish uniform procedures, forms, and deadlines for short sales. The development of the HAFA program pushed both Fannie Mae and Freddie Mac, as well as a number of large servicers, to implement standardized processes and procedures to improve the speed and efficiency of short sale transactions.

I am a real estate professional. What does this mean for my business?

Though there have been many improvements, many members still reiterate that short sales continue to be delayed and servicers often hold unrealistic views of current home values. Often time the result is having a potential buyer cancel the contract and the property going into foreclosure. Enormous amounts of time are spent on potential short sales that result in foreclosures. Even if successful, the process usually takes many months and countless hours and often requires re-marketing because buyers lose patience and terminate the contract. Maintaining a focus on streamlining short sales will reduce the amount of time it takes to sell the property, improve the likelihood the transaction will close, and reduce the number of foreclosures. This will benefit the lender, the seller, the buyer, the community.

NAR Policy:

NAR strongly supported the implementation of the HAFA program and continues to call for improvement of other short sales programs to make them feasible. NAR believes lenders should adopt best practices learned from HAFA principles including identifying the required net proceeds, and approvable closing costs, up front to reduce delays in approving the transaction once a sales contract is executed.

The improvements to the short sale process helped stabilize the housing market during the Great Recession by providing additional options for responsible homeowners to avoid foreclosure. In turn, this allowed homeowners to avoid the foreclosure process and neighborhoods to avoid the blight of vacant foreclosed properties.

Legislative/Regulatory Status/Outlook

NAR continues to meet with the four largest lenders, Fannie Mae, and Freddie Mac to emphasize the importance of making short sales work better. Though many lenders and the GSEs have improved procedures to handle escalated cases, NAR has continued to push for changes to make the short sales process as efficient as regular transactions.

NAR supported the Consumer Financial Protection Bureau's final rule on mortgage servicing that requires servicers to comply with new loss mitigation procedures for loans secured by a borrower’s principal residence. If the servicer receives a complete loss mitigation application more than 37 days before a scheduled foreclosure sale, the servicer must evaluate the borrower within 30 days for all loss mitigation options available, including loan modifications and short sales. A borrower may appeal a denial of a loan modification only if the complete application was received 90 days or more before a scheduled foreclosure. The rule also restricts so-called dual tracking.

No short sale legislation has been introduced recently.

NAR Committee:

Conventional Financing and Policy Committee

Current Legislation/Regulation

CFPB Mortgage Servicing Rule

In-Depth

Issue Summary - Short Sales

Letters to Congress - Foreclosures

Letters to Congress - Short Sales

Congressional testimonies - Foreclosures

Congressional testimonies - Short Sales

Letters to federal agencies - Foreclosures

Letters to federal agencies - Short Sales

NAR Federal Issues Tracker

Legislative Contact(s):

Ken Fears
kfears@nar.realtor
202-383-1066

Matt Emery
MEmery@nar.realtor
202-383-1212

Regulatory Contact(s):

Ken Fears
kfears@nar.realtor
202-383-1066

Matt Emery
MEmery@nar.realtor
202-383-1212

References

NAR Library & Archives has already done the research for you. References (formerly Field Guides) offer links to articles, eBooks, websites, statistics, and more to provide a comprehensive overview of perspectives. EBSCO articles (E) are available only to NAR members and require the member's nar.realtor login.

Short Sales and Foreclosure Resource Certification

Learn more about NAR's latest certification program, core courses, free webinars, FAQs and brochures.

Short Sales Basics

What is a Short Sale? (Bankrate, Mar. 25, 2025)

“A short sale is when a mortgage lender agrees to accept a mortgage payoff amount less than what is owed in order to facilitate a sale of the property by a financially distressed owner. The lender forgives the remaining balance of the loan.”

Buying a Short Sale Property FAQ (Freddie Mac)

“Homeowners pursue a short sale when they can no longer pay the mortgage, need to move from the property and want to avoid a foreclosure. With a short sale, the impact on the homeowner's credit record might not be as bad as a foreclosure in some circumstances.”

What is a Short Sale? (Consumer Financial Protection Bureau, Feb. 2, 2024)

“A short sale is an alternative to foreclosure, but because it is a sale, you will have to leave your home. If your lender or servicer agrees to a a short sale, you may be able to sell your home to pay off your mortgage, even if the sale price or proceeds turns out to be less than the balance remaining on your mortgage.”

What is a Short Sale? The Benefits for Buyers and Sellers (ealtor.com®, Oct. 16, 2022)

“While selling a home as a short sale is hardly ideal, many experts argue it's smarter than pursuing more drastic measures like foreclosure. Foreclosure is when a homeowner falls so behind on the mortgage payments, the lender repossesses the house, often against the homeowner's will, then tries to sell it. If the amount the mortgage company receives from the sale is less than the mortgage debt owed, depending on state laws, the homeowner may have a deficiency judgment. In other words, the now-former homeowner may still owe money on the home loan.”

Working With Short Sales

How to Prepare for a Short Sale (NAR REALTOR® News)

“Contact your lender to see if it has programs to help you stay in your home. You may be able to refinance your loan at a lower interest rate, switch to a different payment plan to help you get caught up, or secure a temporary forbearance period.”

The Short Sale Workflow: What the Listing Agent Should Know to Successfully Negotiate a Short Sale (National Association of REALTORS®)

“This short sales work flow is an educational tool intended to give brokers and sales associates a comprehensive overview of the short sale process (listing, marketing, negotiating and closing properties subject to a potential short sale). It is not intended to and does not constitute legal, financial or tax advice, and should not be interpreted as policy of the National Association. To the extent legal, financial or tax advice is needed by a member or a member’s client or customer, those individuals should be encouraged to consult with their lawyer or accountant.”

Foreclosure Basics

Foreclosure Defined: What It Is, How to Avoid It and What It Means for You (Rocket Mortgage, Sep. 26, 2025)

A lender contacts a homeowner to inform them of their delinquency and notify them about the possibility of foreclosure. The lender and homeowner explore options to keep the loan current. If the homeowner can’t bring their mortgage up to date, the lender may proceed with foreclosure. Depending on your state’s laws, your lender may file with a court to initiate foreclosure.

What is a Foreclosure Property? (The Balance, Jan. 13, 2023)

“Foreclosure is the process of a lender seizing and selling a property when the owner fails to make mortgage payments as agreed. The sale enables the lender to recover at least some of the mortgage balance that remains.”

Foreclosure: What Is It and How Does It Work? (Forbes, Mar. 26, 2026)

“Foreclosure is when the bank or mortgage lender takes possession of property that is in default, often against the homeowner’s will. Your mortgage agreement states that if you stop making payments on your loan, the bank can reclaim the property through foreclosure. Depending on your state, the foreclosure process can be judicial or non-judicial. Some states have options for both.”

How Does Foreclosure Work? (Consumer Financial Protection Bureau, Apr. 3, 2024)

“Foreclosure is when the lender takes action to satisfy the homeowner’s debt out of the sale of collateral (the homeowner’s property) when the homeowner fails to make payments on a mortgage. Foreclosure processes differ by state. Typically, if you fall a few months behind on your mortgage payments, the foreclosure process may begin (although the process can begin earlier or later). Don't wait for the foreclosure process to begin. Reach out for help as soon as you think you might have trouble paying your mortgage.”

What Happens During Foreclosure? (Experian, Mar. 13, 2021)

“Foreclosure procedures differ somewhat from state to state, but they generally follow the same set of steps in all jurisdictions. Understanding the process, and your options at each stage along the way, can help you reduce the distress and damage to your credit that foreclosure can bring.”

Working with Foreclosures

Can I Sell My Home if It Is in Foreclosure? Why Time Is of the Essence (HomeLight, Mar. 17, 2025)

The advantages to selling pre-foreclosure include:

Time to have small repairs done, the home cleaned, and staged to get top dollar
The ability to work with an agent and get top dollar
Avoiding a foreclosure hitting your credit report and limiting your ability to buy again
Move on your timeline, not a bank’s, depending on negotiations with the buyer

How to Buy a Foreclosed Home (U.S. News & World Report, Oct. 23, 2024)

When a property cannot sell at auction, interested buyers will work directly with the bank. If you're buying a bank-owned foreclosure, applying for a loan from the same bank may simplify matters, assuming you can get a competitive interest rate. Fair warning: Some banks will not want to finance foreclosures or will require large down payments because they can be risky investments.

How to Find Foreclosures and Government-Seized Homes (the balance, Jul. 11, 2024)

There are several ways to find foreclosures, including through your agent, websites of bank-owned properties, and government agencies.
Inexperienced foreclosure buyers may want to hire a real estate agent to help them navigate the process.
You can also try bidding for a foreclosure on the courthouse steps, but be aware that you’ll be competing with professionals.
Don’t assume every foreclosure is a bargain; some can be financial nightmares.

Buying a Foreclosed Home: How a Foreclosure Sale Works (realtor.com®, Jul. 23, 2026)

“While foreclosure is hardly a pretty story for the home's previous owners, it can be a bargain bonanza for buyers. Since banks are often eager to unload these foreclosure properties, they aim to break even with an asking price that's typically the sum of the remaining mortgage note plus interest, lawyer fees, and penalties. On average, this ends up totaling about 15% below the home's actual value—and if you want to buy a foreclosure, you'll find it often sells for less than asking price. But buying a foreclosed home does come with risks, so buyers should proceed with caution to see if the gamble is worth it.”

Avoiding Foreclosure (US Department of Housing and Urban Development)

There are a number of programs available through HUD and the FHA to assist homeowners who are at risk of foreclosure and otherwise struggling with their monthly mortgage payments.

eBooks & Other Resources

eBooks.realtor.org

The following eBooks and digital audiobooks are available to NAR members:

All About Short Selling (eBook)

The All-New Real Estate Foreclosure, Short-Selling, Underwater, Property Auction, Positive Cash Flow Book (eBook)

Best New Short Sale Solutions, Top 10 Tips (eBook)

Bidding to Buy A Step-by-Step Guide to Investing in Real Estate Foreclosures (eBook)

Buying Real Estate Foreclosures (eBook)

Cashing in on Pre-foreclosures and Short Sales (eBook)

The Complete Guide to Preventing Foreclosure on Your Home (eBook)

Fire Sale How to Buy US Foreclosures (eBook)

Foreclosure Investing For Dummies (eBook, Audiobook)

How to Make Money on Foreclosures (eBook)

How to Use a Short Sale to Stop Home Foreclosure and Protect Your Finances (eBook)

Make Money in Short-Sale Foreclosures (eBook)

The Realtor & Investor's Complete Step by Step Guide to Mastering Foreclosures by State (Insider Secrets to Finding, Listing, Selling AND Profiting from Foreclosure Properties in ALL 50 States!) (eBook)

Stop Foreclosure Now (eBook)

Tips, Tricks, Foreclosures, and Flips of a Millionaire Real Estate Investor (eBook)

Books, Videos, Research Reports & More

As a member benefit, the following resources and more are available for loan through the NAR Library. Items will be mailed directly to you or made available for pickup at the REALTOR® Building in Chicago.

Short Sale Secrets Exposed: What the Banks Don't Want You to Know (Xlibris Corp., 2012) HG4521 .G93

Avoiding Foreclosure: The Field guide to Short Sales (Plano, TX: Realty Revolution, 2010) HG 4521 B73f

The REALTOR® and The Home Owner's Guide to Short Sales: Step by Step (CreateSpace, 2009) HG 4521 K27

The Art of the Short Sale (Minneapolis, MN: Mill City Press, 2008) HG 4521 C49

Foreclosure Investing for Dummies (Hoboken, NJ: Wiley, 2007) HG 4521 R54

Have an idea for a real estate topic? Send us your suggestions.

The inclusion of links on this page does not imply endorsement by the National Association of REALTORS®. NAR makes no representations about whether the content of any external sites which may be linked in this page complies with state or federal laws or regulations or with applicable NAR policies. These links are provided for your convenience only and you rely on them at your own risk.