Short Sale

A short sale is a real estate transaction in which a property is sold for less than the amount owed on the mortgage. In this scenario, the lender agrees to accept a reduced payoff to facilitate the sale, thus allowing the homeowner to avoid Foreclosure.

For instance, if a homeowner owes $300,000 on their mortgage but the market value of their home has dropped to $250,000, they may seek to sell the property as a short sale. The lender would need to approve the sale and agree to accept the $250,000 as full payment.

Another example is when a homeowner faces financial hardship, such as job loss or medical expenses. They might list their home for a short sale to quickly sell the property and alleviate their financial burden, while the lender agrees to the sale terms in hopes of recovering some of the owed funds.

In cases where a short sale is processed, the seller typically provides documentation of their financial situation to the lender, demonstrating the necessity of the sale at a lower price.