A short sale happens when the lender is shorted on a mortgage, meaning the lender accepts less than the total amount that is due. If your mortgage is $100,000, but your home is worth, say, $90,000, you are $10,000 short, not including costs to close the sale such as real estate commissions, recording fees or title and escrow charges.

Sometimes, to avoid going through the costs of foreclosure, a lender will allow a short sale by letting a buyer purchase the home for less than the mortgage balance while the home is in pre-foreclosure stage.

 

Here are sample steps of a short sale:

 

Seller signs a listing agreement with a Realtor subject to selling as a short sale with lender approval.

  •  The agent finds a buyer who makes an offer.
  •  Seller accepts the buyer’s purchase offer.
  •  Seller’s lender accepts the buyer’s purchase offer. 
  •  Transaction closes when the buyer delivers the funds, the lender releases the lien and the seller delivers the deed.
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