Everything You Need to Know About a Short Sale with Freedom Mortgage

Whether you’re just learning about short sales or you’re ready to begin the process, Freedom Mortgage is here to help you

If you're experiencing financial hardship and can no longer afford your home, a short sale may be an option to help you avoid foreclosure.

Whether you're just learning about short sales or you're ready to begin the process, Freedom Mortgage is here to help you understand your options and guide you through each step. Please contact us at 855-690-5900 and ask for our Short Sale Department to learn more about what options may be available to you.

1. Learn

What Is a Short Sale?

A short sale is when a homeowner sells their home for less than the amount still owed on their mortgage, and the mortgage company agrees to accept the proceeds from the sale as part of the payoff.

Unlike a traditional home sale, a short sale must be approved by the mortgage company before the sale can be completed. The mortgage company will review your financial situation, the proposed sale, and other factors to determine whether a short sale may be approved.

It may be an option that could help you avoid foreclosure while allowing you to transition out of homeownership. Plus, if you make late mortgage payments, you could damage your credit score and potentially face fees and penalties.

Every homeowner's situation is different, so we encourage you to contact us at 855-690-5900 as early as possible. We'll review your circumstances, discuss the options that may be available, and help you understand the best next steps.

Why Consider a Short Sale?

Every situation is unique, and a short sale isn't the right option for everyone. A homeowner may consider a short sale if:

• They're experiencing financial hardship.
• They can no longer afford their mortgage payments.
• Their home's value is less than the mortgage balance.
• They're looking for an alternative to foreclosure.

Short Sale vs. Foreclosure

While both a short sale and foreclosure involve homeowners who can no longer keep their homes, they are very different processes. Understanding these differences can help you make a more informed decision about your options.

	Short Sale	Foreclosure
Process	Voluntary sale	Legal foreclosure process
Lender Involvement	Requires lender approval	Lender takes ownership of the property
Homeowner Involvement	Homeowner participates in the sale process	Property is foreclosed upon
Outcome	May help avoid foreclosure	Results in foreclosure
Control Over the Process	Some	None
Credit Impact	Moderate	Severe
Timeline	6–12 months	A few months to years
Eligibility to Buy Again*	2–4 years, depending on loan type	2–7 years, depending on loan type
Your Obligations	Find a buyer; negotiate short sale with lender	None

2. Explore

How the Short Sale Process Works

• Step 1 – Contact Us: If you’re having trouble making your mortgage payments, contact us as soon as possible. We’ll discuss your options and determine whether a short sale may be appropriate.
• Step 2 – List Your Property: Work with a licensed real estate agent or sell the property yourself (where permitted).
• Step 3 – Receive an Offer: Once you receive an offer from a buyer, you'll begin preparing your short sale package.
• Step 4 – Submit Your Request: Provide all required documentation so we can review your request. Your real estate agent typically submits most documents after you've had them complete an authorized third-party request to act on your behalf.
• Step 5 – Freedom Mortgage Review: We'll review your documentation and arrange for a property valuation.
• Step 6 – Freedom Mortgage Decision: We'll determine whether the proposed short sale meets program requirements.
• Step 7 – Closing (If Approved): We'll coordinate the closing with all parties involved.

What Happens After I Submit My Short Sale Package?

After we receive your complete package, Freedom Mortgage will:

• Review your documentation
• Order a property valuation and title report
• We may request additional information
• Evaluate the proposed sale
• Notify you once a decision has been made.
• If approved, we'll work toward scheduling the closing

Throughout the process, we'll communicate with you if additional information is needed.

3. Prepare

Documents Needed

These are the documents we’ll need from you and your real estate agent before we can process your short sale request.

CUSTOMER FORMS

• Third Party Authorization: If you're working with a real estate agent, this allows Freedom Mortgage to communicate directly with your agent throughout the short sale process. We can accept any third party form, i.e. your realtor’s version.

REAL ESTATE AGENT FORMS

• Listing Agreement: Confirms your property has been listed for sale. If you have an FHA loan, please click here for important information for your real estate agent.
• Purchase Agreement: Once you've accepted an offer, you'll submit the signed purchase agreement.
• Closing Disclosure or Settlement Statement: Provides the financial details of the proposed sale for review.
• Additional Documentation: Depending on your situation, additional documentation may be requested before a decision can be made.

What Can Affect My Timeline?

• Missing documentation
• Active insurance claims
• Buyer financing delays
• Additional approvals that may be required

Special Situations

• Additional Liens: If your property has HOA liens, tax liens, or other liens, additional review may be necessary before the sale can proceed.
• Solar Panels: If your home has financed solar panels or another equipment lien, additional coordination may be required before closing.
• Property Damage: If your property has significant damage or an active homeowners insurance claim, let us know as early as possible.
• Property Condition Changes: Please notify us if the condition of your property changes while your short sale is being reviewed.

Tips for a Smoother Short Sale

Some factors may increase the amount of time needed to complete the review, such as missing documentation, active insurance claims, buyer financing delays and more. Help keep your short sale moving by:

• Submitting complete documentation
• Responding promptly to requests
• Keeping your real estate agent informed
• Informing us of liens early
• Letting us know if your property's condition changes

Please contact us at 855-690-5900 and ask for our Short Sale Department to learn more about what options may be available to you.

4. Pros and Cons

Choosing to pursue a short sale is an important financial decision. While it may provide a path to avoid foreclosure, it's important to understand both the advantages and potential drawbacks before moving forward.

Pros

• May help avoid foreclosure.
• Allows you to sell your home even when you owe more than the home's current value.
• Gives you the opportunity to work directly with your mortgage company throughout the process.
• Provides a structured transition out of homeownership.
• May offer greater control over the outcome than a foreclosure.

Cons

• Approval from the mortgage company is required.
• The review process can take several weeks or longer.
• The proposed sale must meet investor and program requirements.
• Your credit may be affected.
• Not every short sale request is approved.

5. Alternatives to a Short Sale

There may be alternatives that allow you to stay in your home or resolve your mortgage challenges in a different way.

• Loan Modification: If you qualify, modifying your loan may reduce your monthly payment or make your mortgage more affordable.
• Repayment Plan: If you've fallen behind because of a temporary hardship, a repayment plan may allow you to gradually catch up on missed payments.
• Forbearance: In certain situations, a temporary pause or reduction in mortgage payments may be available while you recover from a financial hardship.
• Other Home Retention Options: Depending on your eligibility, there may be additional mortgage assistance programs available that can help you remain in your home.

The earlier you contact us, the more options may be available. Our specialists can review your individual circumstances, explain available solutions, and help you determine the next best step.

6. Take Action

If you believe a short sale may be the right option for your situation, our specialists are here to guide you through every step. Please contact us at 855-690-5900 and ask for our Short Sale Department to learn more about what options may be available to you. We are available Monday—Friday, 8 AM—8 PM ET, and Saturday from 9 AM—2 PM ET.

Short Sale FAQs

How long does a short sale usually take?

Every short sale is different. The timeline depends on factors such as the completeness of the required documentation, the property's value, and the details of the transaction. Once we receive all required documents—including a signed purchase agreement—we'll review your request. The review and closing process generally takes several weeks.

Will a short sale affect my credit?

A short sale may affect your credit, but the impact varies depending on your overall financial situation, payment history, and other factors. If you have questions about how a short sale may affect your credit, you may want to speak with a financial or credit advisor.

Can my short sale be denied?

Yes. Approval depends on several factors, including the property's value, the purchase offer, investor or insurer requirements, and the documentation provided. We'll review your request and let you know if any additional information is needed.

Can foreclosure continue while my short sale is being reviewed?

Depending on your situation, foreclosure proceedings may continue while your short sale is under review. It's important to continue responding to requests for information and stay in communication with us throughout the process.

Are short sale homes sold “as-is”?

In many cases, yes. Short sale properties are typically sold in their current condition, as homeowners may not be able to make repairs before the sale. The terms of the sale are negotiated between the buyer and seller but remain subject to lender approval.

Can I stay in my home during the short sale process?

In most cases, yes. You can typically continue living in your home while your short sale is being reviewed and until the sale closes. Continue maintaining the property and responding promptly to requests for information throughout the process.

Do I need a real estate agent?

While requirements can vary, many homeowners choose to work with a real estate agent who has experience with short sales. An experienced agent can help market your home, negotiate with buyers, and coordinate the documentation needed throughout the process.

What happens after my short sale is approved?

Once your short sale is approved, you'll receive the approval terms, and the transaction can move toward closing. Your real estate agent, closing company, and other parties will work together to complete the sale.

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FHA Approval to Participate (ATP) Program

Information for Real Estate Professionals

If you're assisting a homeowner with an FHA-insured loan, HUD requires several steps to be completed before a short sale or deed-in-lieu can move forward. Following the process below can help avoid delays and keep the transaction on track.

✓ Step 1 – Update the Listing Agreement

Before marketing the property, update the listing agreement to include the HUD-required cancellation clause below.

Required HUD Cancellation Clause:

"Seller may cancel this agreement prior to the ending date of the listing period without advance notice to the broker/agent, and without payment of a commission or any other consideration if the property is conveyed to the mortgage insurer or the mortgage holder."

✓ Step 2 – Complete the Property Valuation

A property valuation must be completed before Freedom Mortgage can prepare the required HUD Form 90045 (Approval to Participate). We will order this on the customer’s behalf.

✓ Step 3 – Borrower Signs HUD Form 90045 (Approval to Participate) within 10 days

Once we've received the updated listing agreement and the appraisal has been completed, we'll send the personalized HUD Form 90045 (Approval to Participate / ATP) to the borrower's mailing address.

Important: The borrower must sign, date, and return the form within 10 calendar days of the date shown on the form.

✓ Step 4 – Update the MLS Listing Price

Update the MLS listing price to match the approved appraised value on HUD Form 90045.

✓ Step 5 – Market the Property

The property must remain listed in the MLS at the approved appraised value for at least 15 days before an offer can be accepted.

✓ Step 6 – Purchase Offer Requirements

Once an eligible purchase offer is received, it must meet HUD's minimum net proceeds requirements based on the anticipated closing date.

	Expected Closing Date	Minimum Net Proceeds to Freedom Mortgage:
	Within 30 days	88% of the appraised value
	31–60 days	86% of the appraised value
	61–120 days	84% of the appraised value

✓ Step 7 – Complete the Pre-Foreclosure Sale Addendum

Once an acceptable purchase offer has been received, the following parties must sign the Pre-Foreclosure Sale Addendum that we will provide to the customer.

• Buyer
• Buyer's Agent
• Listing Agent
• Closing Agent

This document confirms the transaction is an arm's-length sale, as required by HUD.

Your Short Sale Package Summary

Use this checklist to help ensure all FHA ATP requirements have been completed.

☐ Listing agreement updated with HUD cancellation clause

☐ Property appraisal completed

☐ Borrower signed and returned HUD Form 90045 within 10 days

☐ MLS listing updated to the approved appraised value

☐ Property listed for at least 15 days

☐ Purchase offer meets HUD minimum net proceeds requirements

☐ Pre-Foreclosure Sale Addendum signed by all required parties

Questions?

If you have questions about the FHA Approval to Participate (ATP) process or required documentation, please contact Freedom Mortgage at 855-690-5900 before submitting your package.