Finding Short Sale Listings in MLS

Find a short sale and know what to expect when you do

Short Sale, House for Sale sign in front of fenced two-story hone

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A short sale in real estate is when a home is sold for less than the amount due on the mortgage, often when a homeowner is at risk of default. Finding a short sale can mean a great deal for a potential buyer. Every multiple listing service (MLS) system is different, so short sale listings aren't always evident unless you know what to look for. If you're actively seeking out short sale listings, you also have other options besides MLS. Lenders must involve the court system in many states before they can foreclose, so potential short sales often show up in court filings and records. Classified ads and online resources like Craigslist often list short sales, as well.

When you do find a listing, taking certain steps can help ensure that the process moves forward as seamlessly as possible.

Key Takeaways

  • If you're looking for a short sale, start by taking a look at the Multiple Listing Service (MLS).
  • While it may not specifically say "short sale," there are certain terms used in the MLS that can give you a hint.
  • Working with a real estate agent experienced in short sales can help improve your chances. 
  • A lawyer can provide advice and guidance if you have legal questions throughout the process.

Short Sale Listings: What to Look for

Most short sales are listed by real estate agents. You'll find these listings on local websites and in MLS feeds to various sites. The first step in identifying short sales is to find where the term "short sale" appears if you have access to search terms. It might show up under "status modifier," or the term might be contained in the marketing comments. Choose that field as your search term.

Agents might not directly say that a listing is a short sale. Instead, they could slip in terms that identify the listing as a short sale, including:

  • Subject to bank approval
  • Notice of default
  • Give the bank time to respond
  • Preapproved by a bank
  • Headed for auction
  • Third-party review required

The "third party" designation sometimes means that the seller has not yet submitted the required documentation to the lender to be approved for a short sale.

Read the listing carefully. You might be looking at a "contingent short sale," which indicates that the home isn't for sale or that only a backup offer will be considered.


If a listing has a "third party" designation, it will likely take extra time to get the approval process underway.

What Lenders Require From Short Sale Sellers

Lenders typically want proof that the seller has no option other than a short sale or foreclosure:

A Hardship Letter

They invariably require a hardship letter from the seller. What went wrong so that the seller can't meet their mortgage obligation? What have they done to try to remedy the situation? Is the problem likely to resolve at any time in the foreseeable future? The more dire and long term the circumstances, the more likely it is that a lender will approve a short sale.

Proof of Circumstances

Lenders require proof of the circumstances outlined in the letter, including bank statements and tax returns going back at least two years.

Documentation of Assets

They'll want full documentation of all assets that a seller owns, as well as other debts they owe.

Comparative Market Analysis

They'll want a comparative market analysis to nail down the fair market value of the property. No buyer is likely to be willing to pay more than this, so this market report can factor heavily into the lender's decision.

A List of Other Liens

They'll want a full list of any and all other liens that exist against the property.

Some Tips for Short Sale Buyers

Properties with a wide gap between fair market value and the outstanding mortgage balance are often your best bet. They're short sale candidates because a foreclosure sale is not likely to generate enough funds to cover the mortgage. A lender is unlikely to spend the time and resources required to foreclose a home if there's an opportunity to make more money through a short sale.

Your offer should closely align with the home's fair market value — and the more money you can put down, the better.

Find the Right Agent

Above all, hire an agent who is well-versed in handling short sales so they can best advise you of the procedures, including any local customs in your area. The more experience an agent has with short sales, the more likely that the price will be reasonable and acceptable to a lender.

The right agent can touch base with the seller's agent to determine the status of the short sale. You might want to move on if the process has stalled. For example, if a home's seller hasn't yet submitted a full short sale package to the lender, you might be better off looking elsewhere.

Check for Liens

You'll also want to know if numerous liens exist against the property. This doesn't necessarily mean a second mortgage. Tax liens, child support liens, and liens placed by other creditors can all pile on. Every one of these lienholders must agree to the short sale because they're typically in line for payment after the first mortgage lender. These other creditors will not likely receive any money at all from the short sale if the mortgage lender isn't receiving full payment.


Ask a lawyer for advice and guidance if you have legal questions.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Freddie Mac. "Buying a Short Sale Property: Frequently Asked Questions (How Can I Find Properties That Are Being Sold on a Short Sale?)."

  2. Freddie Mac. "Buying a Short Sale Property: Frequently Asked Questions (What Is the Difference Between a Short Sale Listing That Says "Approved for Short Sale" and "Third-Party Review Required"?)."

  3. Redfin. "What Is Contingent vs. Pending?"

  4. Zillow. "What Is a Short Sale: Your Guide to Buying or Selling a Short Sale."

  5. National Association of Realtors. "Short Sales & Foreclosures."

  6. Rocket Mortgage. "What Is a Short Sale? A Guide to the Process."

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