What Does a Short Sale Mean When Selling a House?

A short sale helps homeowners avoid foreclosure.

Buyers aren't likely to purchase a home for more than the house is worth. Through a short sale, a homeowner can put his home on the market and sell it for less than he still owes his mortgage lender. Short sales are a method some homeowners use to avoid foreclosure.

Facts

A homeowner interested in selling her home for less than her current loan balance must apply for a short-sale approval from her lender. Although all lenders have differing criteria for short-sale applications, a seller must often provide financial information that documents a hardship, along with a letter requesting permission from the bank to conduct a short sale.

Short Sale Approved

Once the bank approves the short sale, the homeowner can place the home on the market. The bank must approve any offers he receives from interested buyers, however, before the sale can actually take place. Because of this, short sales often take longer than standard home sales.

Mortgage Balance

According to CNN Money, unless a bank agrees to forgive the remaining balance owed on the seller's mortgage or state laws prohibit the bank from pursuing the balance, the bank may still hold the seller responsible for paying off her loan after the short sale. In some cases, this can result in a lawsuit.

References

• Idaho Department of Finance: Short Sale Guidance
• REALTORMag: Sold Up Short
• CNN Money: You Lost Your House--But You Still Have to Pay

Resources

• Federal Trade Commission: Mortgage Payments Sending You Reeling? Here's What To Do
• National Association of REALTORS: The Basics--Short Sales