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Short Sale
A sale of property for less than the outstanding mortgage balance, with the lender's approval, accepting the proceeds in full satisfaction of the loan.
In depth
In a short sale, the seller's mortgage exceeds the property's market value, and the lender agrees to accept the sale proceeds in lieu of the full balance. The lender approves the buyer's offer, the closing terms, and the deficiency treatment. Misconception: short sales are not always quick; lender approval often takes 60 to 180 days. Practically, short sales are an alternative to foreclosure that preserves some seller credit and may release them from deficiency. Buyers can find good deals but face long timelines and uncertain approvals. Sellers should consult tax and legal counsel because forgiven debt can be taxable income and deficiency rules vary by state. In seller-financed contexts, short sales rarely apply directly but understanding them helps explain underwater situations.
Educational content only. Definitions reflect typical usage in US owner-finance and FSBO transactions; statutes and case law vary by state. Consult a licensed real-estate attorney for fact-specific guidance.