A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner. It's a way to avoid foreclosure when the homeowner can no longer afford to keep the property.

How It Works

In a short sale:

• The homeowner sells the property for less than the remaining mortgage balance
• The lender agrees to accept the proceeds from the sale as full payment
• The difference between the sale price and mortgage balance may be forgiven by the lender
• The homeowner avoids a formal foreclosure

Requirements

To qualify for a short sale, homeowners typically need to demonstrate:

• A documented financial hardship (job loss, medical issue, divorce, etc.)
• The property is worth less than the mortgage balance
• No current ability to bring the loan current
• The mortgage is delinquent or about to become delinquent

Advantages

• Avoid Foreclosure — Helps sellers avoid the damaging consequences of foreclosure
• Reduced Credit Impact — Although a short sale still negatively impacts credit scores, it's generally less severe than a foreclosure
• Faster Resolution — Provides a faster resolution for sellers facing financial hardship
• Move On Quickly — Allows sellers to move on and begin rebuilding their lives
• May Buy Again Sooner — A homeowner who has gone through a short sale may, with certain restrictions, be eligible to purchase another home immediately

Considerations

• The lender must approve the short sale before it can proceed
• The process can take several months
• The homeowner may need to demonstrate they've explored other options
• Some lenders may require a financial review
• The difference forgiven may be considered taxable income

Is It Right for You?

A short sale may be ideal if you:

• Can no longer afford your mortgage payments
• Need to move from the property
• Want to avoid foreclosure but can't keep the home
• Have a hardship that prevents you from catching up on payments