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Chris Pendleton


Shannan Marty

Associate Broker - Realtor®, ABR®,CDPE, CSP, CNE, CSSN, SFR, a-REO, PSC


A real estate transaction in which the sale of the property is less than the balance owed on the mortgage is called a short sale.  Yes, it is possible to sell a home for less than the mortgage.
Homeowners can find themselves in a situation where they cannot make mortgage payments. There are many reasons why this can occur. Health issues, divorce or a loss of job can put homeowners into a financial bind. Perhaps the homeowners have taken out a second mortgage and the property values have fallen.  A short sale may be a solution.
A short sale must be approved by the lender as well as the homeowner.  This option allows both parties to avoid foreclosure.  Lenders may choose to approve a short sale upon deciding that a moderate loss is acceptable over a foreclosure. This agreement may or may not release the borrower from the deficiency amount remaining on the loan balance.
A short sale process may involve the following steps.

  • Seller makes an agreement with the lender to accept a lower selling price on property than the mortgage balance.
  • In many cases, the lender forgives the remaining balance.
  • The seller can sell their property without a foreclosure.
  • The buyer gets a discounted property.
  • The lender forgoes the foreclosure costs and burden of selling the property.

Seller Information

  • A short sale may damage credit but not as much as a foreclosure.
  • Each lender has stipulations on short sales and these procedures must be followed.
  • A short sale is very time consuming.
  • There is a lot of paperwork involved.
  • There is no profit on the sale.
  • Not all lenders will relieve seller of deficiency balance.
  • The 2007 Mortgage Debt Relief Act allows some exclusion from debt discharge.
  • Procedures must be followed on a step by step basis with complete information.

Buyer Information

  • May get discounted price, but may have repairs
  • Additional paperwork involved more than a regular sale
  • Very time consuming and tedious with back and forth negotiations.

Short sales are becoming more and more common where home values have dropped in many parts of the United States. There are many advantages and disadvantages of short sales for both a buyer and a seller. 
It is recommended that those considering a short sale do their homework on the property.  A short sale can be a long term advantage.