Short Sales

What is a short sale? It is a real estate term for a house is sold for less than what is still owed on a homeowner’s mortgage. In these cases, the house is also typically worth less on the market than the amount owed on the mortgage. Homeowners usually have a short sale in order to avoid foreclosure or bankruptcy, but sometimes bankruptcy is still necessary. If you are suffering from financial troubles and cannot keep up with your mortgage, you may be considering options including a short sale, a foreclosure or bankruptcy. An experienced Los Angeles bankruptcy attorney can help you decide whether a short sale, foreclosure, or bankruptcy is the appropriate course of action for you.

How Does a Short Sale Work?

Short sales are any sales in which the seller is “upside down” such that the amount owed to the mortgage lender exceeds the market value of the property, and selling the property falls “short” of what the lien holder owes. Creditors usually require a borrower to prove their economic hardship or inability to repay the loan to qualify for a short sale. A borrower usually must put together a persuasive letter explaining the reason for the short sale.

In contrast to other states, in California, if the lien holder agrees to release the existing lien and accept less than the debt, there will be no “deficiency judgment” after the sale for the lender to pursue. This is a relatively new law that applies to first trust deeds, second trust deeds, and other junior trust deeds.

The proceeds from the short sale will be used to pay off as much of the mortgage as possible. If there are multiple mortgages, all of the creditors must approve the short sale if they are being asked to take less than the amount owed. Larger creditors will have already defined the criteria for approving the terms of the sale.

Even when a creditor is experienced at reviewing short sale applications, the process of approval can take several months from start to finish. If you are thinking about applying for a short sale, you should consult with an attorney as well as your tax consultant immediately to make sure that this is the right decision given your particular objectives.

When is a Short Sale the Right Decision?

Under certain circumstances, a short sale may present a better choice than foreclosure, even if you still have to declare bankruptcy. While creditors in the near future will be able to see your foreclosure, they will not necessarily know about a short sale. If a creditor reports the debt reduction to credit reporting agencies, however, a short sale can affect your credit report.

Another consideration is whether you want to buy a new home in the future. Waiting times differ for short sale and bankruptcy versus foreclosure, with or without a bankruptcy. If you file a Chapter 7 bankruptcy, you will typically need to wait 2 years after the discharge to purchase a house. If you make all of your plan payments in a Chapter 13 bankruptcy over a period of 3-5 years, you will generally need to wait for 2 years after the discharge to buy a new home. After a foreclosure, the waiting period is longer: 7 years to buy another home.

The length of the waiting period may not be the only point of concern, however. Borrowers sometimes find it difficult to get a new mortgage, even after the waiting period during which the lenders’ guidelines prohibit lending to borrowers that have obtained a short sale. Industry standards on this issue continue to evolve.

Helping You Protect Your Financial Future

There is no single correct solution to financial problems that suits everyone. Your particular objectives may make a short sale a good or bad idea, and they may make foreclosure or bankruptcy a viable or a poor option. Experienced Los Angeles bankruptcy lawyer Devin Sawdayi can use his extensive knowledge and experience to evaluate your specific situation, and give you advice on short sales, foreclosure, and bankruptcy based on your specific facts and circumstances. To set up your free consultation, please contact us at (310) 475-9399 or via our online form.



Having been referred to you by my cousin, I wish to thank you for the extremely seamless handling of my Bankruptcy. You answered all my questions professionally and I really appreciate the understanding and care taken with my case. I would definitely refer you to anyone asking me for a good bankruptcy lawyer. 

– G.Epstein



I just want to thank you for the great job that you did helping me get my life back together! I’m not sure what I would have done had I not been given your contact! Not only did you make it possible for me to start fresh but you took care of all the details! And if that wasn’t enough you followed up with me when I needed your help after the fact. Please feel free to post this message as I never miss a chance to say what a great job you have done and are still doing! Thanks Devin for helping me start over! 

– Patricia Scanlan

10866 Wilshire Blvd. #890

Los Angeles, CA 90024

Toll Free: 800.474.6050Phone: 310.475.9399

We are a debt relief agency. We help people file for bankruptcy and have been proudly doing so since 1997.
We serve the following localities: Los Angeles County including Bell Gardens, Beverly Hills, Burbank, Carson, Compton, Culver City, East Los Angeles, El Segundo, Encino, Gardena, Hawthorne, Huntington Park, Lawndale, Los Angeles, Marina del Rey, Playa del Rey, Reseda, San Fernando, Santa Monica, Studio City, Tarzana, Van Nuys, Venice, and Woodland Hills.


Devin Sawdayi | Los Angeles Bankruptcy Lawyer Devin Sawdayi