How does a short sale work in Highland Park, Los Angeles?

Sidney Manzo is a Highland Park real estate agent who handles short sales and helps owners build the file lenders review, in real estate since 1990. A short sale is paperwork-heavy and slow. A complete file at the start is the part you control.

Answer three questions before you list.

1. Are you actually underwater? Compare all payoffs (first loan, HELOC, liens) with a realistic sale price less costs. If there is equity, a regular sale is simpler; see foreclosure help.
2. Is there a hardship you can document? Lenders review hardship: job loss, reduced income, medical costs or a required move.
3. Have you talked with a counselor? A HUD-approved counselor can tell you whether a modification or other retention option fits first. HUD's search is free, or call (800) 569-4287. LA County DCBA counsels for free at 800-593-8222.

Lenders set their own forms, but most ask for the same core documents. Build the file before the first offer arrives.

Owner's file checklist

• ☐ Signed authorization letting the lender speak with your agent and counselor
• ☐ Hardship letter: short, factual and dated
• ☐ Lender's financial statement form (income, expenses, assets)
• ☐ Two recent months of bank statements and pay stubs, or proof of other income
• ☐ Two years of tax returns
• ☐ Listing agreement and MLS listing
• ☐ Purchase contract, with the buyer's proof of funds or pre-approval
• ☐ Estimated settlement statement from escrow
• ☐ Statements for every lien: second loan, HELOC, any other recorded lien

1. List at market value. The lender will order its own broker price opinion or appraisal, so a list price far below the market slows approval. The home review gives a written price opinion based on recent Highland Park sales.
2. Accept an offer "subject to lender approval." Buyers in short sales should expect a wait.
3. Submit the full file to every lienholder. Each lender can ask for changes to price, costs, or a contribution from you.
4. Work the counter-terms. Second-lien holders often ask for a payment from the first lender's proceeds.
5. Get written approval letters. Then escrow closes inside the approval window.

Decision point: if a notice of default is already recorded, Civil Code §2924 says at least three months must pass after it is recorded before the notice of sale is given, and a HUD-approved counselor or attorney can tell you the earliest sale date. A short sale under review doesn't automatically postpone that date. Ask the lender, in writing, whether it will postpone while it reviews.

For a short sale of a one-to-four unit dwelling that the lender agrees to in writing, Code of Civil Procedure §580e bars the lender from collecting a deficiency for that loan. There are limits, including for fraud or waste, and for loans not covered. An attorney should read your approval letter before you sign.

It can be. The IRS treats canceled debt as possible income, and IRS Publication 4681 explains the exclusions. Publication 4681 states that qualified principal residence indebtedness cannot be excluded from income for discharges completed or discharge agreements entered into after December 31, 2025. Other exclusions, such as insolvency, are in the same publication. California rules can differ. Bring the lender's Form 1099-C and your approval letter to a CPA.

Lenders review every line, so expect these:

• County transfer tax: $1.10 per $1,000 (LA County Registrar-Recorder).
• City of Los Angeles transfer tax: $2.25 per $500 (Office of Finance). Measure ULA applies only above the Office of Finance thresholds ($5,400,000 for transactions closing after June 30, 2026).
• Residential Property Report: LADBS lists $70.85 per report; the seller must deliver it to the buyer before entering into an agreement of sale, or, where escrow has been opened, through escrow before close of escrow (LAMC §§ 96.302, 96.307).
• Commission, escrow and title fees, as approved by the lender.

If you are in the Highland Park–Garvanza HPOZ, lenders rarely fund repairs, so plan the sale as-is. Same-color paint and interior cleanup need no HPOZ review under the 2010 Preservation Plan; see selling as-is in Highland Park.

Sidney Manzo, CA DRE #01108914
In real estate since 1990 · RE/MAX Hall of Fame · Member, Pasadena Association of REALTORS® and California Association of REALTORS® (C.A.R.)
Brokerage: RE/MAX Dream Properties (ASLG Inc), CA DRE #02142193

In a short sale, the commission is part of what the lender approves, and it is typically paid from the sale at closing.