Borrower, Lender and Buyer Based Risks of Short Sales

Now that short sales are rampant, there are many firms which paint a rosy picture about short sales, via mortgage based jargons like short sale investing, short sale marketing etc. But, what borrowers and even the potential investors fail to understand is: like all processes, short sale processes also have the other side which doesn’t shine much. The other side of short sales includes some hazards pertaining to the process and its result.

Risk for the Borrower

No doubt, the extent of impact by a short sale is lower than the foreclosure procedure, but the impact is more than what many people boast of. No lender will consider a short sale when the loan process is current. In general, short sales are a prospect after a borrower has missed at least a couple of payments. Couple of payments equals to reporting of two 30 day lates, which starts affecting the credit history. If this wasn’t enough, there would be a couple 100 points less in your credit score.
The borrower always runs the risk of a rejection from the lender; short sales are not an automatic choice of a single party, consent of both the parties is required.
Also, the delay aspect would always be there. It is not like you call, the lender agrees and the process starts in a couple of hours. The acceptance, reviewing and other processes often eat up a month or 2; there would also be late fees for this delay.
Risk for the Lender

A short sale itself is where the real estate property is sold at a moderate loss. A loss is a loss, however rosy you paint a picture of it, right?
Risk for the Buyer

In these days of short sale marketing, if a buyer buys a real estate property during a collapsing economy like phase, then the prices will go down further. Hence, investors eyeing short sale properties should get an ‘expert take’ via real estate brokers who have an experience in handling short sale properties.
The outstanding loans against the properties often accommodate various fines, fees, transfer charges, taxes etc. Often, this aspect comes as a surprise to potential short sale investing parties (buyers).
All in all, one thing which helps all the parties is getting things analyzed and reviewed by an expert before jumping into the bargain.


Short sales do come with some risks for everyone, be it lenders, borrowers or buyers interested in short sale investing. This informative piece covers the various levels of risks on the lines of a sneak preview of a short sale training certification.