Selling a home for less than what's owed on the mortgage, with the lender's approval, to avoid foreclosure.
Full Definition
A short sale occurs when a homeowner who owes more than the property is worth sells the home for its current market value, and the lender agrees to accept the sale proceeds as full (or partial) satisfaction of the mortgage debt. Short sales require the lender's approval, which can take months. They're often pursued as an alternative to foreclosure because the credit damage is typically less severe (a short sale can drop a score by 50–130 points vs. 100–150 for foreclosure). Sellers may still owe the deficiency — the difference between the sale price and outstanding balance — unless the lender agrees to forgive it. Most loan programs require a 2–4 year wait after a short sale before you can get a new mortgage.
Related Terms
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