A “short sale” is an option for a homeowner to avoid foreclosure when they can no longer afford the mortgage on the home.   In a short sale, a servicer allows the borrower to sell the property at its current value, even if the sale nets less than the total amount owed on the mortgage. In order for a lender to agree to a short sale, most require the borrower to list and actively market the home at its fair value. The sale must be an arms length market transaction with all proceeds (after selling costs) applied to the discounted mortgage payoff.

Short sales can sometimes be complex transactions involving careful coordination and close cooperation among a number of parties -- servicers, appraisers, borrowers, purchasers, real estate brokers, title agencies and often mortgage insurance companies and junior lien holders. A short sale usually provides a better outcome for borrowers, investors and communities. However, due to the complexity of and time required for completion of these transactions, servicers historically have often opted to pursue foreclosure instead, even where a short sale would have provided a substantially better outcome for borrowers, investors and communities.  During the financial and housing market crisis, though, lenders and servicers are more agreeable to reasonable short sales. 

Foreclosure Sub-categories