What Is a Short Sale?
A short sale is a transaction in which your lender agrees to accept less than the full amount owed on the mortgage so the property can be sold, the lien released, and the debt resolved. You do not receive money from the sale. The purpose is to close out the debt, avoid foreclosure, and — when negotiated correctly — get a written release of any remaining balance you might otherwise still owe.
Short sales are not simple and they are not fast. They require your lender’s loss mitigation department, a complete documentation package, an accepted buyer offer, and written lender approval before closing can happen. The process works when it is managed correctly. It falls apart when it is not.
Why New York Is Different
Most states let lenders foreclose without going near a courtroom. New York is not one of those states.
New York is a judicial foreclosure state. That means your lender cannot take your home without filing a lawsuit, serving you properly, and winning a court case. Before they can even file, they are required under RPAPL § 1304 to send you a 90-day pre-foreclosure notice — and that notice has strict content and delivery requirements. If the lender gets the notice wrong, the foreclosure can be dismissed. Then they have to start over.
Once a foreclosure action is filed, New York courts require a mandatory settlement conference under CPLR 3408, typically within 60 days, where both sides must negotiate in good faith. The lender is required to show up with someone who has actual authority to settle. If they stall or fail to participate properly, the court can sanction them, toll interest, and award you attorney fees.
The average New York foreclosure from filing to sale runs over 400 days. Many take considerably longer, particularly in Nassau and Suffolk counties where court volume is high. This is not an accident — the system is deliberately designed to give homeowners time to find a resolution.
What this means for you: you have more runway here than you would in most states. That runway is not an excuse to wait. It is a window to make a better decision than watching the court process play out around you. A short sale, handled properly, ends things on negotiated terms — not a courthouse auction.
Does a Short Sale Make Sense for You?
A short sale may be the right path if:
- You owe more than the property is currently worth
- You have a documented financial hardship — job loss, reduced income, medical expenses, divorce, or another verifiable change in circumstances
- You cannot sustain payments and do not want a foreclosure on your record
- You want a written deficiency waiver rather than leaving yourself exposed to a personal judgment
A short sale is not the right path if you have equity in the property, if the hardship is temporary, or if a loan modification is realistic. I will tell you you which category you are in.
The Deficiency Question — and Why It Matters More in New York
When a property sells short, the difference between what you owed and what it sold for is called the deficiency. In New York, there is no law that automatically prevents a lender from pursuing that balance after a short sale. They have 90 days from the consummation of the sale to seek a deficiency judgment — and if they get one, they can garnish wages and place liens on other property you own.
This is where the language in your short sale approval letter matters enormously. The approval letter must explicitly state that the lender waives its right to pursue the deficiency. If it does not say that in writing, the waiver does not exist. I negotiate deficiency language directly with the servicer. This is not paperwork — it is the part of the process that determines whether the short sale actually resolves your problem or just delays it.
Separately: if the lender forgives a portion of your debt, the IRS may treat that forgiven amount as taxable income depending on your specific situation. Talk to a tax advisor before we list. I will tell you who to call if you do not already have someone.
What to Expect — The Short Sale Process in New York
Step 1: Loan and Hardship Assessment
Before anything is listed, we review your loan. Who the servicer is matters. Whether the loan is FHA, VA, conventional (Fannie Mae or Freddie Mac), or held in a private portfolio determines the timeline and the approval requirements. FHA short sales require HUD involvement and have specific net proceeds requirements. VA loans go through the VA’s compromise sale program. Conventional loans follow Fannie Mae or Freddie Mac servicer guidelines, which vary.
We also look at what is on the title. In New York, it is not unusual to find IRS liens, unpaid property taxes, second mortgages, or HELOCs alongside the primary loan. Every lienholder on the property has to be part of the short sale. We find out what we are dealing with before the listing goes up — not two months in.
Step 2: Listing and Marketing
The property is listed on the New York MLS at fair market value. The listing discloses that the sale is subject to lender approval. Short sales require arm’s-length transactions — the buyer and seller cannot have a prior relationship that influences the terms.
Buyers need to understand from day one that the lender, not the seller, has final authority over the sale. A buyer with a hard move deadline is the wrong buyer for this transaction. I qualify buyers on this point before an offer goes anywhere.
Step 3: Offer Submission
When an acceptable offer comes in, it goes to the lender’s loss mitigation department along with the complete short sale package. Nothing moves until the package is complete. A missing document does not slow the review — it restarts the clock. I build and submit the package and follow up directly with the servicer.
Step 4: Lender Review, BPO, and Negotiation
The lender orders their own valuation — typically a Broker Price Opinion or a full appraisal. They will not accept what the market says if their number is different. This is a negotiation, and I handle it. We are negotiating on price, closing date, and — critically — the deficiency language that goes into the approval letter.
Timeline from offer submission to lender approval runs 30 to 120 days. It depends on the lender, the loan type, the number of lienholders, and how complete the package is. Fannie Mae and Freddie Mac deals tend to move faster. Private portfolio loans can take longer. I will give you a realistic range based on your specific servicer, not a generic estimate.
Step 5: Approval and Closing
Written lender approval arrives with a deadline attached — typically 30 days to close. The approval letter specifies the net proceeds required, the closing costs the lender will and will not cover, the closing deadline, and the deficiency terms. Miss the closing window and you go back through the process.
New York requires an attorney at closing. You will need one. I work with attorneys experienced in short sale closings and can refer you if you do not have someone.
Your CSSE™ — Ken Trestka
Once you engage me, I manage the lender communication, package submission, servicer negotiation, BPO follow-up, lienholder coordination, and the timeline from listing to closing. You stay informed at every step. You are not on hold with a servicer’s 800 number trying to find out where your file is.
There is no upfront cost to you as a seller. Agent commissions are negotiated as part of the short sale approval and paid from the sale proceeds at closing.
Before we list, I will tell you whether your situation is likely to qualify, what a realistic timeline looks like with your specific servicer, and what to expect on the deficiency. If a short sale is not the right path, I will say so and explain what is.
[631-926-0047] | [ken@kensold.com] |
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