A short sale can be one of the better deals in a tight market, a home priced below what the seller owes because the lender has agreed to take less. The catch is patience. Short sales move on the bank’s timeline, not yours. Here is how buying a short sale works in Virginia and what to watch.
Written by Anthony I. Shin, Esq., Principal and real estate attorney at Prime Title & Escrow
What a short sale actually is
A short sale happens when a homeowner owes more on the mortgage than the home is worth and sells with the lender’s permission to accept less than the full payoff. The owner still owns the home and signs the deed, but the lender has to approve the price and agree to release its lien for less than it is owed. That approval is the whole ballgame.
How it is different from a foreclosure
People mix these up. In a foreclosure, the owner has lost the home and a trustee or the bank sells it. In a short sale, the owner is still in the picture and selling voluntarily, just with the lender’s blessing. That makes a short sale closer to a normal purchase on the title side, you usually get a title search and an owner’s policy, and the seller signs, but slower because of the approval. The difference matters, and I cover the other side of it in buying a foreclosure.
Once you and the seller agree, the file goes to the seller’s lender for approval, and that can take weeks or longer. The lender can counter the price, ask for changes, or decline. Go in expecting a slower path than a standard sale, keep your financing ready, and do not be surprised by silence while the bank reviews. The price is not final until the lender says so.
Clearing every lien, not just the first
The seller’s main mortgage is the obvious one, but it may not be the only claim. A second mortgage, a home equity line, an HOA balance, or a judgment can each sit against the property, and every one of them has to be resolved for you to take clean title. A short-sale approval from the first lender does not automatically clear the rest.
It is easy to assume that once the main lender approves the short sale, the path is clear. It is not. Each lienholder has to agree to release for the deal to close with clean title, which is exactly what a title search uncovers and what I work through before closing. A missed junior lien is how a short sale falls apart at the table. My guide to clearing title explains how these get resolved.
How I help
I run the title early so we know every lien that has to be cleared, not just the headline mortgage, and I coordinate the payoffs and releases so your closing produces clean ownership. I keep the closing ready to move the moment the lender’s approval lands, so the deal does not stall on paperwork. The owner’s coverage that protects you afterward is explained in owner’s versus lender’s title insurance.
Send me the property and I will run the title early, find every lien that has to be cleared, and keep your closing ready to move when the lender approves, in Virginia or West Virginia.
Get Your Free Quoteor call (703) 552-4155Frequently asked questions
What is a short sale?
A short sale is when a homeowner who owes more on the mortgage than the home is worth sells with the lender’s permission to accept less than the full payoff. The owner still owns the home and signs the deed, but the lender has to approve the price and release its lien for less than it is owed.
Is buying a short sale a good idea in Virginia?
It can offer a good price, but it asks for patience. Short sales move on the lender’s timeline, the price is not final until the lender approves, and the deal can fall through. If you can wait and keep your financing ready, a short sale can be worthwhile.
How long does a short sale take in Virginia?
Longer than a standard sale. Once you and the seller agree, the seller’s lender has to review and approve the price, which can take weeks or more. The lender can also counter or decline, so build extra time into your plans.
Is a short sale the same as a foreclosure?
No. In a foreclosure the owner has lost the home and a trustee or the bank sells it. In a short sale the owner still owns the home and sells voluntarily, with the lender’s approval to accept less than the balance. A short sale is closer to a normal purchase on the title side.
Can I get title insurance on a short sale?
Yes. Because the owner is selling voluntarily and signs the deed, a short sale generally allows a normal title search and an owner’s title insurance policy, unlike a foreclosure auction where coverage is harder to arrange beforehand.
What happens to other liens in a short sale?
Approval from the main lender does not clear everything. A second mortgage, a home equity line, an HOA balance, or a judgment can each sit against the property, and every one has to be resolved for the buyer to take clean title. A title search uncovers them before closing.
This article is general information about buying short sales in Virginia and West Virginia. It is not legal advice for your specific transaction. Please confirm the details with me directly.