Some Basics About Short Sales
A “short sale” occurs when a homeowner must move out of their property and finds that the market value of their home is less than the amount of money he (or she) owes on their mortgage. You may have heard this referred to as being “underwater”.
Simply put, the proceeds from the sale will not be enough money to pay off the mortgage. This difference between the total amount of the mortgage and the amount that the homeowner will pay to the lender is called a deficiency.
When someone is “underwater” with their mortgage, there is a short list of options they have available to sell their home.
The homeowner can make up the deficiency by bringing the necessary money to settlement.
If this is not possible, the homeowner can approach the lender about accepting this “short” sum of sale proceeds as full payment on the mortgage.
The lender is under no obligation to accept the “short sale” as consideration for the release of the mortgage lien, and as discussed in some of our related posts, the lender may still attach conditions regarding repayment of the deficiency prior to the lien release.