What is a Short Sale?

In a residential situation, a “short sale,” as the term is commonly used, occurs when a seller’s bank agrees to accept less than the full amount owed on a loan, in exchange for the bank’s obligation to release the deed of trust on the home.  The seller’s incentive is to get out of a house that he can no longer afford and mitigate damage to his credit report.  The Bank’s incentive is to expedite the sale of the house and reduce the financial loss to the bank.  A short sale is typically faster and less expensive than a judicial or non-judicial foreclosure.  A homeowner considering a short sale should give careful consideration to factors such as junior liens on the property, the homeowner’s credit rating and the tax implications of a potential short sale.