What Is a Short Sale?

If you’re a homeowner in Nassau or Suffolk County, NY, and you’ve fallen behind on your mortgage payments, you’re not alone. With interest rates nearing 7% and property values facing downward pressure, many Long Island homeowners are navigating financial hardship. If you’re facing foreclosure or in default, a short sale may be a strategic option to avoid losing everything. But is it right for you?

In this guide, we’ll break down what a short sale is, how it works, who qualifies, and all the pros and cons—specifically for those living in Nassau and Suffolk Counties. Whether you’re already in foreclosure or just starting to struggle with your mortgage, this comprehensive guide will help you make an informed decision.

A short sale occurs when a homeowner sells their property for less than the amount owed on the mortgage, with the lender’s approval. The lender agrees to accept a “short” payoff and forgive the remaining balance to avoid a costly and lengthy foreclosure.

Let’s say you owe $475,000 on your home, but market conditions have dropped the value to $410,000. In a short sale, your lender might agree to accept $410,000 and cancel the remaining $65,000 debt.

Who Is a Short Sale For?

Short sales are primarily for homeowners who:

Are behind on mortgage payments
Are underwater (owe more than their home is worth)
Are facing foreclosure
Have experienced financial hardship (job loss, divorce, medical bills, etc.)
Want to avoid the long-term credit damage of a foreclosure

Why Homeowners in Nassau & Suffolk Counties Should Pay Attention

While Long Island has traditionally been a strong housing market, economic uncertainty, inflation, and high mortgage rates have made it harder for some homeowners to keep up with monthly payments.

According to data from the New York State Department of Financial Services, foreclosures and defaults have been rising in Nassau and Suffolk. In many cases, distressed properties are sitting longer on the market or selling for less than they would have just a year ago.

If you’re in Babylon, Brentwood, Patchogue, Hempstead, Freeport, or anywhere in between, now is the time to understand your options before foreclosure proceedings take over your life.

How Does a Short Sale Work? Step-by-Step

Here’s what the typical short sale process looks like for Long Island homeowners:

1. Contact a Local Real Estate Agent Experienced in Short Sales

Find a real estate agent who understands the Long Island market and has experience navigating lender negotiations. They’ll help list your property and work with your lender.

2. Contact Your Lender or Loan Servicer

Let them know you’re considering a short sale. Ask for their short sale packet, which will outline what documents are required.

3. Submit a Hardship Letter

This letter explains your situation—why you can’t continue making payments. Common reasons include:

Job loss or reduced income
Divorce or separation
Medical emergency
Death in the family
Relocation

4. List the Property on the Market

Your agent will price your home based on current market conditions in Nassau or Suffolk. It’s important to show the lender you’ve made a good-faith effort to get market value.

5. Receive and Submit Offers

Once an offer comes in, it must be submitted to your lender for approval. They may perform their own valuation (BPO or appraisal).

6. Lender Review and Approval

This step can take weeks or even months. The bank may:

Approve the offer as is
Counter with a higher price
Request additional documentation

7. Close the Sale

Once approved, the closing process begins. The proceeds go to the lender, and you walk away without a foreclosure on your record.

Pros of Doing a Short Sale in Nassau or Suffolk County

✅ Avoid Foreclosure

Foreclosure stays on your credit report for 7 years. A short sale, by contrast, might only drop your credit score temporarily and can be reported more favorably as “settled.”

✅ Stay in Control

You choose your real estate agent, pricing strategy, and closing date (with lender approval). This gives you more dignity than having your home taken at auction.

✅ Potential for Cash Relocation Assistance

Some lenders or government programs offer cash incentives (up to $10,000+) to homeowners who complete a short sale and move out on time.

✅ Less Impact on Credit

While still a negative event, a short sale is usually better for your FICO score than foreclosure or bankruptcy.

✅ Buy Another Home Sooner

Homeowners who complete a short sale can often buy another home in as little as 2–3 years, whereas foreclosure may require a 7-year waiting period.

✅ May Eliminate Deficiency Judgment

In many cases, your lender may agree not to pursue you for the remaining balance. Be sure this is confirmed in writing!

Cons of Doing a Short Sale

❌ Requires Lender Approval

You cannot complete a short sale without your bank’s full cooperation. This often involves a long, bureaucratic process.

❌ No Guarantee of Debt Forgiveness

Unless your lender explicitly agrees in writing to waive the deficiency balance, they may still try to collect.

❌ Tax Consequences

Forgiven debt may be considered taxable income unless you qualify for an exemption (such as insolvency or the Mortgage Forgiveness Debt Relief Act).

❌ Takes Time

Short sales in Nassau and Suffolk typically take 2–6 months or longer to close, which can delay your plans.

❌ You Won’t Get Any Equity

Even if the home sells for near market value, all proceeds go to the lender. You walk away with no profit, but potentially less debt.

Short Sale vs. Foreclosure in Long Island: Key Differences

Feature	Short Sale	Foreclosure
Credit Impact	Moderate (drops score 100–150 points)	Severe (can drop score 200–300 points)
Control	You maintain some control	You lose control to the bank
Timeframe	3–6 months	Can be lengthy but unpredictable
Relocation Help	Possible	Rare
Future Home Purchase	2–3 years	Up to 7 years
Public Record	Less stigma	Public auction, legal record

Do You Qualify for a Short Sale?

Every lender is different, but most require:

✅ 1. A Legitimate Hardship

🔹 What it means:

You must prove to your lender that you are experiencing a real financial hardship that prevents you from continuing to make your mortgage payments. Common hardships include:

Job loss or significant reduction in income
Divorce or legal separation
Major illness, injury, or medical expenses
Death of a co-borrower or household income contributor
Natural disaster or property damage
Unexpected relocation (e.g., military orders or job transfer)

⚖️ Implications:

This is the foundation of your short sale approval. No hardship = no short sale.
You’ll need to submit a “hardship letter” explaining your circumstances, along with supporting documentation (e.g., termination letter, medical bills, divorce decree).

✅ Pros:

A strong hardship case increases approval odds.
Helps demonstrate your honesty and intent to resolve the debt.

❌ Cons:

Lenders may reject vague or unconvincing hardships, or ask for more proof.
If your hardship is viewed as avoidable or temporary, they may push for other options like loan modification.

✅ 2. Mortgage Is Past Due or At Risk

🔹 What it means:

You must either be behind on your mortgage payments or be able to show that you’re about to fall behind. Some lenders won’t consider a short sale unless you’re already delinquent, while others may allow a short sale if default is imminent.

⚖️ Implications:

If you’re still current but struggling, you may need to show clear evidence of financial strain—like maxed-out credit cards, missed utility bills, or shrinking savings.
Being behind increases urgency but may lower your credit score before the short sale is approved.

✅ Pros:

Lenders are more motivated to approve short sales for loans in default because they want to avoid foreclosure costs.
Falling behind can trigger faster review and approval processes.

❌ Cons:

Once you miss payments, your credit will already take a hit (even before foreclosure starts).
Being behind may create emotional and financial stress due to collection efforts and notices of default.

✅ 3. Property Is Underwater

🔹 What it means:

The market value of your home is less than the amount you owe on your mortgage. This is also known as having negative equity.

🏠 Example:

You owe $500,000 on your mortgage, but the home is worth $430,000 in today’s market. That $70,000 shortfall qualifies the property as underwater.

⚖️ Implications:

Lenders are unlikely to approve a short sale unless they face a potential loss.
They will do their own valuation (appraisal or BPO) to confirm that the sale price is within market range.

✅ Pros:

Being underwater strengthens your case for needing debt relief.
Lenders often prefer accepting a small loss now versus a bigger loss at foreclosure auction.

❌ Cons:

If you aren’t underwater, your lender may demand that you bring the difference to closing, defeating the purpose of a short sale.
The lender may reject offers they feel are too low compared to market value.

✅ 4. Seller Is Not Able to Bring Funds to Closing

🔹 What it means:

You must lack the financial ability to cover the shortfall between what the home sells for and what is owed. This is a key difference between a short sale and a standard payoff.

⚖️ Implications:

You’ll likely be asked to submit a financial package, including pay stubs, tax returns, bank statements, and a monthly budget worksheet.
The lender wants to confirm that you genuinely can’t make up the difference—and aren’t just walking away.

✅ Pros:

If you’re truly insolvent, your lender may waive the deficiency balance and allow you to walk away with no further obligation.
Some homeowners also qualify for relocation assistance ($3,000–$10,000) at closing.

❌ Cons:

If the lender believes you have assets or income, they may reject the short sale or require a cash contribution or promissory note for part of the loss.

✅ 5. No Other Foreclosure Alternatives Are Feasible

🔹 What it means:

You must demonstrate that other options—like loan modification, forbearance, deed in lieu of foreclosure, or bankruptcy—are not viable in your case.

⚖️ Implications:

The lender will usually evaluate your file to rule out retention options.
If loan modification or repayment plans are possible, they may require you to try those first.

✅ Pros:

Shows you’re not walking away recklessly—you’re pursuing all responsible options.
Helps ensure the short sale is your last resort, which most lenders require.

❌ Cons:

This can delay the process, especially if the lender insists you try a trial loan mod before allowing a short sale.
Some homeowners waste valuable time pursuing options that ultimately fail, pushing them closer to foreclosure.

🧠 Final Tip:

Even if you don’t meet every single requirement perfectly, you may still qualify—especially if:

The property is in pre-foreclosure or auction is scheduled
You’re in a high-risk ZIP code with many defaults (common in parts of Nassau & Suffolk)
The lender is a servicer known for working with short sales (e.g., Wells Fargo, Chase, Mr. Cooper)

To know for sure, contact your lender or a local Long Island real estate expert.

Why It’s Critical to Work with a Local Short Sale Expert

The Nassau and Suffolk County real estate markets are hyper-local. From Brentwood to Hicksville, from Patchogue to Valley Stream, every town has its own trends, pricing, and buyer behavior.

Working with a local agent:

Ensures accurate pricing
Helps navigate New York’s foreclosure laws
Improves odds of getting lender approval
Provides access to investors or buyers familiar with short sales

Common Myths About Short Sales

❌ “I need to be in foreclosure to do a short sale.”
Wrong. You can initiate a short sale as soon as you realize you’re in trouble.

❌ “I won’t owe anything after a short sale.”
Not necessarily. Always get it in writing from the bank that they won’t pursue a deficiency.

❌ “Short sales don’t work in New York.”
False. While they take time, short sales are approved every day in Nassau and Suffolk.

Alternatives to Short Sale

If you’re not sure short selling is right for you, consider:

1. Loan Modification

🔹 What It Is:

A loan modification is a permanent change to one or more terms of your mortgage to make it more affordable. The lender agrees to adjust your existing loan rather than refinance it. This can involve:

Lowering the interest rate
Extending the loan term (e.g., from 30 to 40 years)
Adding missed payments to the loan balance
Converting an adjustable rate to a fixed rate

🔹 Pros:

Keeps you in your home
Avoids foreclosure
May reduce monthly payments
Does not require new credit approval

🔹 Cons:

May extend loan term and increase total interest paid
Requires financial documentation and approval
Not guaranteed approval
Can take weeks or months to process
A history of missed payments may still appear on your credit report

🔹 Impact on Credit:

If successful, the long-term impact may be neutral to positive, but missed payments prior to the modification can still lower your credit score.

🔹 Best For:

Homeowners with a temporary or past hardship who want to stay in the home and can now afford adjusted payments.

2. Forbearance

🔹 What It Is:

Forbearance is a temporary pause or reduction of your mortgage payments, granted by your lender. It does not forgive the payments; instead, it delays them for a set period (typically 3–12 months). You must catch up later through:

A lump-sum repayment
A repayment plan
A loan modification
Extending your mortgage term

🔹 Pros:

Immediate relief from payments
Gives you time to recover financially
Often easier to qualify for than loan modification
Was widely used during COVID-19

🔹 Cons:

Payments must be made up later
Lump sum may be required, depending on lender’s terms
Doesn’t stop interest from accruing (usually)
Not a long-term solution

🔹 Impact on Credit:

If you enter into forbearance through a formal agreement and follow its terms, it typically won’t hurt your credit. If missed payments occur outside an agreement, they will negatively affect your score.

🔹 Best For:

Homeowners with a short-term hardship (e.g., job loss, medical event, divorce) who expect to resume regular payments in the near future.

3. Deed in Lieu of Foreclosure

🔹 What It Is:

A deed in lieu of foreclosure is when you voluntarily transfer ownership of your home to the lender to satisfy your mortgage debt and avoid formal foreclosure. It’s a “friendly foreclosure” and typically requires lender approval.

🔹 Pros:

Avoids public foreclosure auction
May reduce or eliminate mortgage debt
Often faster and less expensive than foreclosure
May offer cash-for-keys relocation assistance
Stops foreclosure process (if approved before sale date)

🔹 Cons:

You lose the home
Credit impact still negative, though usually less than foreclosure
Lender may still pursue a deficiency judgment (unless waived in writing)
Not guaranteed approval—especially if the home has multiple liens

🔹 Impact on Credit:

Still reported negatively (similar to foreclosure), but some credit scoring models view it more favorably because it was voluntary.

🔹 Best For:

Homeowners who have no way to afford the mortgage, want to walk away gracefully, and can’t sell the home through a short sale.

4. Bankruptcy (Chapter 13)

🔹 What It Is:

Chapter 13 Bankruptcy allows individuals with regular income to restructure their debts and repay them over 3–5 years through a court-approved plan. It can stop foreclosure and allow you to catch up on missed mortgage payments gradually.

Unlike Chapter 7, it does not discharge all debt—it reorganizes it.

🔹 Pros:

Immediately stops foreclosure through the “automatic stay”
Allows you to keep your home if you resume payments
Consolidates all debt into one manageable monthly payment
May eliminate some unsecured debt (like credit cards)
Offers legal protection from creditors

🔹 Cons:

Stays on your credit report for 7 years
You’ll have to follow a strict repayment plan
Legal and court fees apply
Your finances are scrutinized and spending is restricted
Missing plan payments could restart foreclosure

🔹 Impact on Credit:

Severe short-term hit to credit (score may drop 100–200+ points), but better long-term outcomes than foreclosure if you complete the plan.

🔹 Best For:

Homeowners with steady income, who are behind on mortgage payments but want to save their home and get back on track.

🔚 Final Thoughts: Which Option Is Best?

Option	Keeps Home?	Credit Impact	Short-Term Relief	Long-Term Solution	Lender Approval Required?
Loan Modification	✅ Yes	Moderate	✅ Yes	✅ Yes	✅ Yes
Forbearance	✅ Yes	Minimal if on record	✅✅ High	❌ No	✅ Yes
Deed in Lieu	❌ No	High (less than foreclosure)	✅ Yes	✅ Yes	✅ Yes
Chapter 13 Bankruptcy	✅ Yes	Severe (short-term)	✅ Yes	✅ Yes	❌ No (court approval)

👇 Recommendation for Nassau & Suffolk County Homeowners:

Still earning income but behind on payments? → Start with a loan modification or Chapter 13 bankruptcy.
Short-term hardship or temporary job loss? → Ask for forbearance immediately.
No way to stay in the home? → Consider a short sale or deed in lieu to avoid foreclosure.
Multiple debts and legal issues? → Speak to a bankruptcy attorney about Chapter 13.

Each option has its own pros, cons, and eligibility criteria. A free consultation with a professional can help.

How to Get Started Today

If you’re in Nassau or Suffolk County and want to explore the short sale process:

Call your lender now – Ask about their short sale process and request a hardship package.
Get a market analysis – A local real estate professional can provide a Comparative Market Analysis (CMA) for your property.
Gather your documents – You’ll need tax returns, pay stubs, bank statements, a hardship letter, and more.
Connect with an attorney – Preferably one who specializes in foreclosure defense or short sale negotiation.

Final Thoughts: Is a Short Sale Right for You?

For Long Island homeowners facing financial distress, a short sale is not a failure—it’s a smart exit strategy. It allows you to avoid foreclosure, reduce your debt burden, and move forward with a clean slate.

While not perfect, it’s often a better alternative than waiting for the bank to take your home.

If you’re located in Nassau or Suffolk County, or anywhere else on Long Island, and want to explore this option, consult with a local short sale expert to protect your home, credit, and future.

Need Help Navigating a Short Sale?

We help homeowners across Long Island get out from under unaffordable mortgages through short sales, cash offers, and more. If you’re behind on your payments, in foreclosure, or simply want to sell your house fast, we’re here to help.

👉 Schedule a free consultation today – No pressure, no cost. Just real answers from real experts.

Disclaimer: The information provided in this article is for informational and educational purposes only and should not be construed as legal, financial, or tax advice. Every homeowner’s situation is unique, and laws and regulations may vary based on your jurisdiction. You should consult with a qualified attorney, tax professional, or financial advisor before making any decisions regarding foreclosure, bankruptcy, or short sales. We are not attorneys and do not provide legal advice.

We are licensed real estate professionals in New York and can help guide you through the home-selling process, but we are not legal or financial advisors.