Short Sale

Short sale foreclosure refers to cases where the mortgage lender will accept less than the amount owned on a home loan debt so that the borrower can sell the home and avoid foreclosure. For example, a mortgage borrower who owes $100,000 on his house mortgage may have a buyer for his house for the sales price of $95,000. The mortgage lender may allow the mortgage borrower to complete the sale if the mortgage lender gets all of the money ($95,000). The house is sold for an amount ($95,000) which is "short" of the amount owed ($100,000).

Why would a mortgage lender accept less than the amount that is owed? Because the mortgage lender may actually get more money than if it foreclosed on the house. Foreclosure costs mortgage lenders a lot of money. They have the court and legal costs, then they have to take care of the house, and then it may take a long time to sell the house. And the mortgage lender may have to sell the house for a loss anyway. It may be cheaper to simply agree to take less money before foreclosure starts.

Sometimes a mortgage lender will agree to a short sale, but require that the borrower sign a promissory note promising to pay the mortgage lender more money. Also the mortgage lender may have other conditions or requirements.

If you have a buyer who will pay less than the amount you owe, ask your mortgage lender about a short sale. If your lender agrees, be sure that you understand all of the details and have a lawyer look over all documents to make sure that what you are signing is what you agreed to.

This website, Stop Foreclosure - Five Options You Need To Know, is to help you understand the options (short sale foreclosure and others) available to you to stop or avoid foreclosure in your situation. You need to beware that not every option is available in every situation. An option that works in one situation may not work in different situation. See stop foreclosure options to help you understand the options available to you to stop or avoid foreclosure in your situation.