What is Short Sale?
A short sale is when a homeowner sells their property for less than the amount still owed on the mortgage, and the lender agrees to accept that smaller (“short”) payoff. It is usually pursued during financial hardship when the home is worth less than the debt against it. Because the lender must approve the price and terms, short sales typically take longer than a standard sale.
Example: A homeowner owes $400,000 but the house will only sell for $350,000. Rather than go through foreclosure, the bank agrees to accept the $350,000 as full settlement, and the sale closes as a short sale.