Short Sales 101

Understanding Short Sales

Fannie Mae appreciates the critical role you, as the listing agent, play in helping homeowners who are considering a short sale — it is not an easy decision for homeowners to make, but if they are facing foreclosure or can no longer afford their home it becomes an option to investigate. You play an important role in helping homeowners navigate the process and the information contained in the documents will help you assist the homeowner as they consider whether to pursue a short sale.

To begin the process, you must obtain a homeowner's permission to represent them as the listing agent by having them sign the Fannie Mae Homeowner Authorization Form.

Step 1: Determine Homeowner Eligibility

The first step to pursuing a short sale is for the homeowner to determine if he or she is eligible. You might have a client who wants to pursue a short sale, but who hasn't taken this first critical step. If your client has not investigated their eligibility, use Fannie Mae's Loan Lookup tool to determine if Fannie Mae is the first lien holder on your client's property. If Fannie Mae is the first lien holder, you should review their eligibility status and contact their mortgage servicer to confirm their eligibility and what is required to pursue a short sale.

Step 2: Request List Price Guidance

Once you have confirmed your client's eligibility for a short sale, agents can use the HomePath Short Sales Portal to submit a list price guidance request.

After Fannie Mae receives your list price guidance request through its Short Sales Portal, we will take the necessary steps to provide you with a recommended list price after a thorough valuation of the property has been completed.

Once you receive the recommendation, list the property as "Active" in your local MLS and market the property ensuring maximum exposure to obtain the highest and best contract offers. After you have listed the property, the process of showing the home and evaluating offers with your client is similar to a normal real estate sales transaction.

Step 3: Submit a Contract

If your client's mortgage is serviced by one the participating servicers you can submit the contract directly to Fannie Mae through the HomePath Short Sales Portal. If your client's loan is serviced by any other servicer, you should submit the contract directly to that servicer following their process for short sale contract submissions.

As part of this process, all parties involved will be required to sign the Fannie Mae Short Sale Affidavit confirming that the transaction is an arm's-length transaction.

Step 4: Contract Review

Participating Mortgage Servicers

If your client's mortgage is serviced by a participating mortgage servicer, you can submit your accepted contract directly to Fannie Mae through the HomePath Short Sale Portal. As the first lien holder, Fannie Mae will begin the process of reviewing the contract terms and will communicate through the portal if there are items in the contract we want to counter before approving or denying your contract submission. You will be notified via email throughout the process if information is being requested, a valuation has been ordered, a counter has been made, or a decision has been made regarding the contract.

Non-Participating Mortgage Servicers

Once you submit a contract to the mortgage servicer on your client's behalf, the mortgage servicer will review the contract. The servicer may look to revise or counter the contract, including sales price, closing costs, closing dates or other terms. In considering a contract, payment(s) to subordinate or second lien holders must not exceed $6,000. The subordinate lien holder is accepting the $6,000 (or a lesser amount if the $6,000 is being divided among more than one lien holder) in exchange for a release of its lien.

The subordinate lien holder must not require or accept additional funds from the borrower, real estate agent(s), buyer, private mortgage insurers that have a stake in the property, or other parties to the short sale transaction. In addition, the mortgage servicer will determine if it is necessary to request a contribution from your client and/or an appropriate contribution arrangement.

Once all required information has been reviewed, you will receive a final written decision on your submitted contract from the mortgage servicer. You should expect a response back from the servicer in 30 calendar days or less. If your client's servicer is not being responsive and Fannie Mae is the first lien holder, use our Escalate an Issue tool to make us aware of your issue.

Step 5: Prepare to Close

Once you receive notification that the contract you submitted on your client's behalf has been accepted, prepare your client for closing — this portion of the transaction is very similar to non short sale transactions. As final documents are being prepared, work to schedule the closing with the title company. At closing, your client, the buyer, and all parties involved in the transaction must sign a Short Sale Affidavit confirming that the transaction is an arm's-length transaction between parties who are unrelated and unaffiliated by family, marriage, or commercial enterprise. Remember that all funds that change hands must be disclosed to and approved by the mortgage servicer and shown on the HUD-1, which is why it is important for you to understand which closing costs are acceptable and which are deemed unacceptable and explain them to your client.

Contact Fannie Mae at 1-800-2FANNIE if you have any questions about the process or call 1-888-894-0205 to reach the HomePath Short Sale portal support center if you have any questions about how to use the HomePath Short Sale Portal. Training aids can be accessed from the Short Sale resource page by clicking here.

Equal Housing Opportunity

IT IS ILLEGAL TO DISCRIMINATE AGAINST any person because of race, color, religion, sex, handicap, familial status, (having one or more children), or national origin.

  • In the sale or rental of housing or residential lots.
  • In advertising the sale or rental of housing.
  • In the financing of housing.
  • In the appraisal of housing.
  • In the provision of real estate brokerage services.
  • Blockbusting is also illegal.

Anyone who feels he or she has been discriminated against should send a complaint to: U.S. Department of Housing and Urban Development, Assistant Secretary for Fair Housing and Equal Opportunity, Washington, D.C. 20410.