WHAT IS A SHORT SALE?

A short sale occurs when a lien holder releases a lien on a given property for less than the amount currently owed.

The phrase “short sale” refers to a real estate transaction where there is more debt owed against a property for sale than the property’s current market value.
In other words, the price the buyer is willing to pay is not enough to
1) pay off the loan(s) encumbering the property AND
2) pay the costs associated with selling the property, including closing costs and commissions. Furthermore, the homeowner seller is also otherwise unable or unwilling to pay the difference of between the sales price and what’s owed and the costs of the sale. The creditor of the property offered for sale in this situation may be willing and able to allow the property to be sold for less than the debt owed on the loan and thus accept an amount that is less than (meaning “short”) of the debt owed.

A successful short sale requires that all the lenders involved agree to release the liens on the property in exchange for the net proceeds of the sale.

**Please note that the term “short” refers to the discount on amount owed by the seller, and does not necessarily have any bearing on whether the price of the property is a bargain relative to market value.