What Is a Short Sale in Washington State?
How a Short Sale Works
In a short sale, your lender agrees to accept less than the full loan balance as payment in full when you sell your home. The buyer purchases the property at market value, and the lender receives those proceeds — even though it's less than what you owe. The difference is typically forgiven, though tax implications can vary.
Short sales require lender approval, which means the process takes longer than a traditional sale — typically 2–4 months from listing to close. But for homeowners who can't afford their mortgage and don't have equity to fall back on, it's often the most dignified path forward.
📋 A short sale is almost always better for your credit than a foreclosure. It shows on your record as "settled" rather than a full default, and most homeowners can qualify for a new mortgage sooner after a short sale than after foreclosure.
When Does a Short Sale Make Sense?
A short sale may be a good fit if:
- You owe more than your home is currently worth (you're "underwater")
- You're experiencing a genuine financial hardship — job loss, divorce, medical bills, death of a co-borrower
- You don't want to stay in the home long-term and want a clean exit
- You want to minimize the credit impact compared to foreclosure
- You have some time — short sales take longer than a cash sale or traditional listing
What Does the Short Sale Process Look Like?
Every lender handles short sales differently, but the general process in Washington State follows these steps:
- Consult with a short sale specialist — understand your options and whether your lender is likely to approve
- List the property — the home goes on the MLS at or near market value
- Receive an offer — once a buyer makes an offer, it's submitted to your lender along with a hardship package
- Lender review — the lender orders their own appraisal and reviews your hardship documentation; this stage takes 30–90 days typically
- Approval and close — once approved, the sale proceeds like a normal closing
Will I Owe Taxes on the Forgiven Amount?
Potentially — this is an important question to ask a tax professional or CPA before proceeding. In some cases, forgiven debt is treated as taxable income. There are exceptions depending on your situation and the nature of the loan. We always recommend speaking with a tax advisor as part of your short sale planning.
How We Help
Arielle Albinger has been negotiating short sales in the Washington State market since the early days of her real estate career. We understand the lender approval process, know how to package a hardship file effectively, and can guide you through every step — from the initial consultation through closing. Our service is free to homeowners; the commission is paid by the buyer's transaction.