How does a short sale work? My name is Nick Hedberg. I work on a lot of short sales. A short sale is when the mortgage balance - or the amount that you owe across mortgages, liens, partial claims, judgments, etc. - is higher than what the property is worth. The first step for virtually all short sales is they want the property listed on the market. You then have to get an offer on the property. Once you have that offer, you put together the whole short sale package based on what the bank or the servicer wants. It does vary depending on the actual loan type as well - with an FHA loan, you'd have to get an ATP letter, an approval to participate, up front.
Once you have the whole short sale package, that then gets submitted to the bank or the servicer. They then hire an independent appraiser to come out and take a look at your property to value it. Then, based on the loan type, they will generally settle it based on a certain percentage of the appraisal value - for FHA, that starts at 88 percent; for VA, it's normally between 84.5 and 88 percent; for conventional loans, it can vary a lot based on the condition of the property. Getting the correct appraisal - or having the appraisal come in too high - is one of the most common reasons why short sales get denied. So you have to be on top of that and make sure the appraiser has the correct information on repairs to properly do their job. Once the package is in, it normally takes a servicer anywhere from 30 to 60 days to take a look at it, review it, and send it back with corrections. They virtually always have questions and need more information, and we go through cycles updating the HUD settlement statement. I'd say the average short sale takes about 6 to 12 months. We wish it was faster, but that's the way it happens - especially if the first appraisal comes in too high, which virtually guarantees it's going to take at least 9 to 12 months, and that unfortunately happens a lot.
It is much easier to do a short sale if it gets started at the beginning of the foreclosure process. If you start it a week or two before the actual foreclosure auction, you're going to be battling that foreclosure auction date the entire time. We've had files where we've had to stop the auction five or six times. It makes the process a lot harder and a lot more stressful, but we can absolutely do it. We had Antonio, somebody we were working with not too long ago - he called us the night before the foreclosure auction. We were able to stop the auction, get the package submitted, and work through HUD - I think Fannie Mae on that one - to get the whole process started. That one did take roughly 12 months, because the property was in very bad shape. It had a rat infestation, it was repeatedly broken into, which made it a challenge. But that's what we do.
There aren't that many short sales anymore, so there aren't that many agents and processors still doing these on a regular basis - but we can help with short sales, judgments, liens, lots of different types. If you have out-of-the-box issues with your property, give us a call. The faster we can get started, the higher the odds are that we can get the whole process pushed through and approved. My name is Nick Hedberg with We Sell Houses LA. If you're looking to sell your house and you have title issues, liens, judgments, or it's a short sale, please give us a call. We'd love to chat with you and see how we can help.
A short sale is a lender-approved sale for less than the loan balance. Done right in California, it ends the debt (Code of Civil Procedure §580e), costs the seller nothing in commission, and closes in months — not the years of damage a foreclosure leaves behind.
This is the 2026 process we run for Los Angeles homeowners, start to finish.
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The mechanics matter, because most short sales that fail die on paperwork: an incomplete hardship package, a missed lender deadline, a low valuation nobody disputed. The process on this page is the one we run file after file — including FHA Pre-Foreclosure Sales and VA Compromise Sales, which follow their own program rules.
I’m Nick Hedberg, founder of We Sell Houses LA. Use this page to understand the road; use the phone when you want someone to drive.
Hardship letter, financials, lender authorization. We assemble the package and price the home with a real market analysis.
The home is marketed like any sale. When an offer lands we submit it; the lender orders a valuation and negotiates terms with us.
Approval letter in hand, escrow closes like a normal sale. The lender pays commissions; §580e bars pursuit of the balance.
California law: an approved short sale of a 1–4 unit home ends the deficiency — the lender cannot come after the balance.
Seller cost — commissions come from the lender’s side of the closing.
Typical start-to-close window we see for LA short sales, depending on the lender.
Mid-divorce and newly out of work, Nicole and John had run out of money to finish the projects around the house — and the foreclosure auction was almost here when they reached us. We got the auction stopped and completed their short sale with PennyMac. They walked away with a lender-paid relocation fee and no foreclosure on their credit.
Antonio called us the night before his home was set to go to auction. He had lost his job twice and couldn’t catch up on payments — and his wife and two kids were living in the house. We got the foreclosure postponed, worked with Fannie Mae, and got his short sale approved. No foreclosure on his record, and his family moved forward on their own terms.
The two pillars are a genuine hardship — job loss, divorce, medical bills, payment shock — and owing more than the home is worth after sale costs. Different lenders and programs weigh the details differently, which is why our first call is a free eligibility review, not a sales pitch.
Both hurt, but not equally. A short sale typically reports as a settled account and is generally treated more leniently by future lenders; a completed foreclosure is one of the most damaging items a report can carry and limits financing eligibility for years longer. Most of our clients see meaningful recovery within a year or two of closing.
Not always. Some lenders and programs will review a short sale based on imminent hardship even if you are current — though policies vary. Bring us the facts; we have run files both ways and will tell you honestly how your servicer tends to behave.
If you’re already behind on your payments, the timeline changes and so do your options, so it helps to see exactly where things stand before you decide what’s next.
Sometimes — lenders may issue a 1099-C for cancelled debt, and exclusions like insolvency or qualified principal residence relief may apply depending on current federal and state rules. We flag the issue early and insist you confirm specifics with a CPA before closing; we can refer one who handles short sales regularly.
Possibly. The FHA Pre-Foreclosure Sale program can pay qualifying sellers relocation assistance, the VA Compromise Sale resolves the shortfall for veterans, and some conventional lenders offer incentives on approved short sales — one of our clients received a lender-paid relocation fee from PennyMac. We ask for it in every negotiation.
Generally sooner than after a foreclosure. Waiting periods depend on the loan type and your circumstances — guidelines change, and extenuating-circumstance exceptions exist — but a short sale almost always shortens the road back to homeownership. We connect past clients with lenders who specialize in post-short-sale financing.
More guides: LA short sale help · Sell a house in foreclosure · FHA short sale · VA compromise sale · Notice of Default plan
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