If you’re wondering what happens as part of the short sale process, these are the standard steps: Step 1: The homeowner starts by talking to their lender and a real estate agent about selling their house as a short sale. At this point, they may submit a short sale package to their lender. This is a set of documents—like W-2s and bank statements—that proves they’re no longer capable of making their mortgage payments and have no assets that would allow them to catch up on payments. Step 2: The homeowner works with a real estate agent to list the property. They’ll execute a sales contract for the purchase of the property once a buyer is interested. But the lender must approve the contract, and it’s not final until then—even if both the seller and the buyer agree on the terms. Step 3: The lender reviews the contract and could respond in a variety of ways. They could choose not to respond at all, they could reject the offer, they could reject the offer but outline which terms they would agree to, or they just might approve the offer. Step 4: When the lender’s response is presented to the potential buyer, the contract will either stay the same or the buyer will choose to accept or reject the lender’s terms. So, at this point, the ball is in the buyer’s court. Step 5: If the contract is approved, the short sale property closes, and ownership of the home is transferred to the new buyer. The lender receives all proceeds from the sale of the property and typically pays commissions and other sellers closing costs. Most of the time, the lender forgives the loan balance as part of the short sell agreement. But it could pursue a deficiency judgment against the borrower. This means the lender takes legal action to have the borrower repay the remainder of their mortgage that wasn’t covered by the sale of the house.