Homeowner resource
Short sales in New Jersey
A short sale lets you sell a house for less than you owe on the mortgage, with your lender’s approval, as an alternative to foreclosure. It can work, but it isn’t quick or simple, and it isn’t right for everyone. Here’s what to understand first.
What a short sale actually is
As the Consumer Financial Protection Bureau explains, a short sale is a sale of your home for less than what you owe on your mortgage. It’s a type of loss mitigation and an alternative to foreclosure, but because it’s a sale, you will leave the home.
The lender has to approve both the sale and the price, because it’s agreeing to accept less than the full balance. Ask your lender exactly what it needs; reviews generally involve paperwork such as a hardship explanation, financial documents and a buyer’s offer.
Ask these before you start
The deficiency. The difference between the sale price and what you owe may still be collectible. Ask the lender to waive it, and get any waiver in writing.
Taxes. Forgiven debt can have tax consequences. Ask a tax professional before you agree to anything.
Your credit. Ask how a short sale is likely to be reported compared with the alternatives.
Short sale vs. the alternatives
- Stay and modify. If you want to keep the house and your income can support it, ask the servicer about a loan modification or repayment plan first.
- Short sale. Sell with the lender’s approval for less than you owe. You need a buyer, the lender’s sign-off and patience.
- Deed in lieu of foreclosure. Some lenders will take the house back instead of foreclosing. Ask the same deficiency question.
- Foreclosure. Doing nothing leads here. How NJ foreclosure works, and the free help available.
- Bankruptcy. A legal decision for an attorney. The real-estate side of bankruptcy.
- A regular or direct sale. If the house would likely sell for enough to pay off the mortgage and any other liens plus the costs of selling, a short sale is usually not needed. Selling a house that still has a mortgage explains how the payoff works.
Can a direct buyer help with a short sale?
Sometimes. In a short sale the lender decides what price it will accept, so any buyer can only buy if the lender approves the deal. A direct buyer can help with a house that needs work or a timeline that matters to the lender.
Before you go down the short-sale road, find out what the house is really worth. An online estimate is only a starting point. If there’s more value than you think, an ordinary sale may solve the problem without the lender’s approval.
Where to get qualified help
- Find a HUD-approved housing counselorFree or low-cost help from a counselor approved by the U.S. Department of Housing and Urban Development. By phone: 800-569-4287.
- Legal Services of New JerseyFree civil legal help for eligible New Jersey residents.
- Mortgage help from the CFPBThe Consumer Financial Protection Bureau’s guide to options when you’re struggling to pay, and to avoiding foreclosure-relief scams.
This guide is general information from the real-estate side. It isn’t legal, tax or financial advice, and laws and procedures change. The links above go to official or nonprofit sources; Ryan and RESP aren’t affiliated with them.
Related guides
- Facing foreclosure How NJ foreclosure works and the free help available.
- Bankruptcy and your house Questions to take to your attorney.
- How offers work What a direct offer considers.
Talk to Ryan
Not sure which path fits your situation?
Text or call Ryan and tell him what’s going on with the house. He’ll explain the options he sees, including the ones that don’t involve a direct sale.
Ready for a number? Request an offer