A short sale occurs when a property is sold and the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured to the property upon receipt of less money than is actually owed.
It is possible to have a short sale even if the sales price is enough to pay off the existing mortgage because additional closing costs and commissions can put the sale underwater. It is also possible to have a short sale when the first mortgage is paid in full but the second or third mortgage is shorted.
At the time of writing, Elizabeth Weintraub, BRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.
Also Known As: Shorted sale
Alternate Spellings: Short-sale
Common Misspellings: hort sale
If the unpaid balance of a loan is, say, $100,000 and a property sells for $90,000, under a short sale the lender might accept $90,000 as payment in full.