Short Sale
A sale where the lender agrees to accept less than the full balance owed on the mortgage.
Definition
A short sale occurs when a lender agrees to accept less than the outstanding mortgage balance as full settlement of the debt. It typically happens when a homeowner is underwater (owes more than the property is worth), facing hardship, and can't sell for enough to cover the loan.
Short sales are an alternative to foreclosure for both lenders (who want to avoid REO holding costs and the legal expense of foreclosure) and homeowners (who preserve more dignity, potentially avoid deficiency judgments, and see less credit impact than foreclosure).
For investors, short sales require patience — lender approval can take 30–120+ days. Deals can fall apart if the lender's internal BPO (Broker Price Opinion) values the property higher than the investor's offer. However, approved short sales often deliver properties at meaningful discounts and with clear title.
Related Terms
Foreclosure
The legal process by which a lender repossesses a property when the borrower defaults on the loan.
REO Property
Real Estate Owned — a bank-owned property acquired through foreclosure when it didn't sell at auction.
Due Diligence
The investigation and verification process buyers conduct before committing to a real estate purchase.
Also in "S"
Seasoning
The minimum amount of time a property must be owned or a loan must exist before a lender will refinance or lend against it.
Seller Financing
A transaction where the seller extends credit to the buyer, eliminating the need for a traditional bank loan.
Subject-To
Buying a property 'subject to' the existing mortgage — the deed transfers but the loan stays in the seller's name.