Short Sales – Why do we need to know what they are?

The role of ‘short sales’ in a tough housing market

The term “short sale” has virtually become a household word in the last couple of years as home values decrease and countless homeowners face financial difficulties. But, what does the term “short sale” really mean and why is it important to us all – whether we are facing financial difficulties or not?

The Short Sale Addendum to the Arizona Purchase Contract, developed by the Arizona Association of REALTORS states: “The term ‘short sale’ is used to describe a sale in a situation where there is more debt owing against the property than the property’s value.” In other words, the property is “underwater”.

It has been widely reported that Arizona n has seen a rising number of foreclosure filings – with even more expected in the future. Many neighborhoods have seen an increase in foreclosures and properties being sold as short sales, and in some areas of the local market, short sales comprise as much as 40 percent of the total housing inventory. Therefore, all inventory may be impacted – even inventory that is not distressed.

It’s important to understand who the players are in a short sale real estate transaction:

First, the primary players are the homeowner and the mortgage company(s), often referred to as the loan ‘servicer’ or lender. The homeowner must talk with the loan servicer about their situation and will be expected to explain and provide documentation of financial distress. Ultimately, the goal of the mortgage company is to keep the homeowner in the home. A short sale is typically the last resort. (Ignoring phone calls or mail from the lender will leave them little choice but to proceed with foreclosure action.)

Once the foreclosure process has started, it becomes more difficult to work out a possible solution with the lender. If the process has advanced to the “Notice of Trustee’s Sale” stage, the amount of time to market the property for sale is reduced making it a challenge to obtain as close to fair market value for the property as possible, particularly in areas of the Tucson market where properties are moving slower. Loan servicers are working on behalf of investors and are expected to negotiate the highest possible sales price for the property.

The second key player in a short sale is the tax professional and/or financial advisor. A short sale where a portion of the debt is “forgiven” is considered relief of debt and may be treated as income for tax purposes. When debt is forgiven, the creditor must submit a Form 1099 to the IRS. It’s important to discuss with a tax professional what the potential tax consequences are and to make sure the tax professional is up to date on current tax law. The Mortgage Forgiveness Debt Relief Act of 2007 provides relief for some homeowners; for more information visit

When involved in the foreclosure process, is also important for the homeowner to confer with an attorney who can explain Arizona law related to the release of liens or mortgage debt and counsel the homeowner on any potential legal issues. Some government programs currently being offered to homeowners facing foreclosure do not allow the lender to pursue any deficiency balance; however, not all homeowners will qualify for these programs

Finally, it is important to work with a real estate professional. Calling a REALTOR® sooner rather than later is imperative whether the goal is to keep the house or sell it. Should it be necessary to proceed with a short sale, the lender will require the property to be listed with a licensed REALTOR®.

When deciding which real estate agent to list the property with, ask what education, training and experience they have listing and closing short sales, which are often very complex transactions. Processes and requirements are routinely changing and it is important for the homeowner to work with an agent who has up to date information. An experienced short sale agent is constantly adapting to various bank policy changes and stays current on the various programs available to distressed homeowners. This will often make a difference in getting the property sold through a short sale as opposed to a foreclosure.

Joyce Corsi Hazen, REALTOR, CNE, SFR

Long Realty Arizona Properties

Cel: 602-284-9822   Fax: 623-505-4346


About Joyce Hazen, REALTOR, CIPS, CNE, SFR

An Arizona and Greater Metropolitan Phoenix Realtor, I am a full service professional with an International Designation, CIPS, who works with Buyers, Sellers & Investors all around the world. I have experience in both the residential and commercial communities. In addition, as a Certified Negotiation Expert I work my hardest to utilize my negotiation skills to benefit all clients. I also speak French, English and Italian. Originally from Canada, having moved to the Valley in 2000, I pay special attention to your personal individual needs and desires, to find you the home, land, or building that you’ve been dreaming of. Real Estate has given me the privilege of working with so many wonderful people and with my knowledge, tools and skill set I have been fortunate to realize that individual needs change from person to person, business to business, culture to culture, and that every request is important to you. For that very reason, when I embark on a journey, I work closely with you, whether you are buying or selling a home or commercial space, whether it is a tradition sale, short sale or foreclosure. I will help you as I am highly motivated, results driven and have taken time to research the marketplace, trends and opportunities to know how to best serve you. With my experience, culture and languages, you can rest assured that your best interests are my priority. I will help you find the home or property of your choice and professionally negotiate on your behalf. It is for these reasons that so many of my clients refer me to their friends and families. The Valley of the Sun has been one of the fastest growing U.S. metropolitan communities, Phoenix has grown tremendously over the past couple decades. Financial Institutions are working with Americans, offering terrific mortgage deals, as well as with foreign investors who are interested in purchasing second homes… the opportunities are endless. My mission and goal is to provide you with superior service. Welcoming new residents to Arizona including Americans and International clients who want to relocate permanently, a home away from home or to escape cold winters, is a pleasure! I enjoy meeting new people and always set my goals high and strive to achieve them. If you’re ready to search for the perfect property, I am here to show you the very best homes that meet your criteria.
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