Short Sales for FHA loans

We just closed another short sale last week where the existing loan was an FHA loan.  HUD (who runs FHA loans) has a very specific set of rules with regards to short sales.  Here is a list of some of the pros and cons when dealing with a HUD short sale.

The Good:

HUD has a predetermined price that they will accept when doing  a short sale.  This price is based on an appraisal that can be completed well before an offer is placed on the listing.  They will tell and agent upfront what they are willing to accept.

No games, no gimmicks, no guessing.

They will take 88% in the first 30 days, 86% in the next 30 days, and 84% after that.  Note that this is the NET price that HUD will take.

They will also pay up to $1000 to the seller for relocation expenses.

The Bad:

The property must have remained Owner Occupied for HUD to even consider a short sale.  If the appraiser, or one of the banks property preservation members suspects that the house is not being lived in then they will refuse to do a short sale.

There are ways around this of course, so it helps to have experienced short sale negotiators on your team.

Documentation can be a little difficult to gather but it’s not much different than other short sale programs, You just need to keep the seller informed of what they will be expected to provide inorder for the short sale to go through.


The Ugly:

If the FHA appraisal comes in above the true market value, you will have a fight on your hands trying to get the lender to see it your way.  It will be several months before they are willing to send a second appraiser out.  Good luck sending them comparable sales and repairs estimates.

Truthfully, The FHA short sale is a fairly straight forward short sale.  We were happy to close this transaction as it was another win/win for everyone.  The seller was able to move on with minimal credit damage and no deficiency balance to worry about, all agents got paid their full commission, and the buyer (an investor) was able to purchase a great home for a reasonable price.

If you would like help with your short sales, please feel free to contact us.


  1. […] can read a previous post about FHA Short Sales to get some of the details regarding some of the unique characteristics of this type of short sale […]

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