How Much Does it Cost to Sell Your House in a Short Sale?

Short Sale sign outside of a nice looking home

You might be surprised to learn that selling your home in a short sale typically costs you $0 out of pocket. How is that possible? Well, if you can’t afford your mortgage payments and you have negative equity in your home, you could be at risk of foreclosure. Lenders want to avoid foreclosure, so they typically agree to absorb some, if not all, of the associated short sale costs. 


In this article, we’ll discuss the costs involved with short sale mediation, plus some surprises that an “underwater” homeowner should be aware of before they short sell their home.  


But first:


What is a Short Sale?

A short sale occurs when a struggling homeowner sells their home for less than they owe on their mortgage. Their lender accepts the shorted payoff amount and typically forgives the unpaid principal. 


Some lenders may coerce the seller into a personal loan or other contract in order to pay off the balance. That’s why it’s critical to hire an experienced short sale attorney and short sale listing agent to represent you to your lender. 


As we discuss here, homeowners are rarely on the hook for the costs involved to short sell their home, so it’s in your best interests to hire experienced professionals.    


What Fees Are Involved with a Short Sale?

Woman holds open a wallet filled with money


Selling a short sale will have similar fees as with selling a house via traditional sale. They, too, have real estate commissions, attorney fees, and closing costs like escrow fees, taxes, title insurance, etc. 


The typical costs of a short sale are:

  • Real estate commission
  • Attorney fees
  • Plus normal closing costs:
    • Transfer fee
    • Documentation fees
    • Title insurance fee
    • Escrow fees
    • Taxes


Perhaps the primary difference is that the attorney fees are usually higher than with a traditional sale, simply because it’s a specialized transaction that tends to take longer


Real estate commission fees may also be slightly elevated than the standard 5%. This makes sense when you factor in how much more time and effort is required of your short sale listing agent. 


Remember, commissions are traditionally paid for out of your sale proceeds. When you sell your house for less than you owe on it, there’s no extra money to pay your real estate agent. They are taking a risk that your home will indeed attract a qualified buyer and be approved for a short sale. 


In any case, it’s commonplace for mortgage lenders to pay your attorney fees, listing agent commission, and other closing costs in full.


Why would lenders pay these fees, when they’re already taking a loss on the mortgage principal?


Because they want to avoid foreclosure as much as you do. They know that you probably can’t afford the costs on your own and that you’ll likely end up in a foreclosure if they don’t step up and pay these fees. 


Foreclosures are time-consuming and expensive. Plus, lenders don’t want to own your home or manage the property. They’re in the business of lending money. Absorbing these short sale costs are usually better for them in the long run.      


Fees That May Not Be Covered in Your Short Sale

Homeowners Association document


While your mortgage lender will certainly bear the bulk of your short sale costs, they typically don’t cover lifestyle or personal bills pertaining to home maintenance. 


For instance, a lender won’t normally pay your overdue utility bills or property taxes. Instead, they’ll require you to pay them off with a personal loan or require your new buyer to pay them during closing. 


Lenders also don’t typically pay outstanding HOA (homeowners association) fees. They don’t believe it’s their responsibility to pay shared costs of lawn care, pool, or road maintenance. 


Second mortgages or home equity loans also fall outside the sphere of lender-paid costs. When an underwater homeowner has a second home loan, their short sale attorney needs to involve the 2nd lender in negotiations. 


Second loans don’t always get forgiven – a lot depends on the situation. Either way, an experienced short sale negotiator will be able to get you the best possible terms with both lenders.


Homeowners who are struggling financially often have overdue utility bills, HOA fees, and other 3rd party costs that end up being additional liens on their home. Since these liens need to be paid off before closing, it’s common for your attorney and short sale listing agent to strategically list your house for a lower price and have the new buyer pay off the liens during closing. 


What is a relocation incentive?

In some cases, lenders will pay sellers a certain amount to help them with moving costs. This is sometimes called relocation assistance, “cash for keys,” moving expenses, or a moving incentive. 


This relocation fee is negotiated between your short sale attorney and your lender, and typically starts at $3,000 and up. 


The lender pays this fee to the seller in return for keeping the house in good condition and vacating the property by closing day. 



If you’re “underwater” on your mortgage and struggling to pay your bills, there’s no reason not to short-sell your home because it doesn’t cost you a penny. (You can even have much of your relocation expenses paid for.)


The big caveat here is that you need to hire an experienced short sale team to represent you. You certainly shouldn’t attempt any lender negotiations on your own, nor try to sell your house without the representation of a short sale listing agent. 


Short sales are complicated transactions. You don’t want to be left with a huge amount of debt or a court-ordered deficiency judgment against you. 


Remember, with the right team on your side, you should never have to pay any out-of-pocket fees to sell your house in a short sale. 



If you live in the Washington, DC metro area, call Marc Dosik and the Fed City Team to discuss your options for a short sale. Marc and his team have rescued over 130 homeowners from foreclosure proceedings. They help you sell your home and work with your lender to get the mortgage deficiency forgiven, all at no cost to you. They even negotiate with the lender to pay your relocation costs, giving you $3,000 or more cash-in-pocket to help you get back on your feet.


Avoid foreclosure. Contact Marc Dosik today!


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Want to learn more about the short sale process?

Download our FREE ebook:  How to Sell Your House in a Short Sale. Get your copy today!


Disclaimer: Every homeowner’s situation is unique, and local, state and federal laws change regularly. As such, this information should not be considered as legal, tax, financial or investment advice. Consult a qualified professional before making any financial decisions.

About the Author
Marc Dosik
Marc is the Associate Broker and primary decision-maker for Fed City Team. He's lived in the Washington DC metro area all his life and has been a licensed broker since 1998. Marc knows and understands the DC area market and specializes in contracts, negotiation tactics, grant programs for home buyers, short sales and foreclosures, and 1031 Exchanges.

If you’re selling in, or relocating to the DC area, contact the Fed City Team today.