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Short sale

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Definition

A short sale is a sale of the home for less than the amount still owed on the mortgage, if the servicer or loan owner agrees. It is a form of loss mitigation and not a foreclosure sale.

In plain English

If the home cannot be sold for enough to pay the mortgage in full, the servicer may still agree to let the sale close. That agreed shortfall sale is a short sale. The borrower leaves through a sale, not through foreclosure. Whether any remaining balance is collected later depends on the papers and the state. This page does not state a deficiency rule.

Technical definition

CFPB defines a short sale as selling the home for less than the mortgage balance, with servicer agreement, and names it as loss mitigation. Fannie Mae’s consumer glossary includes the heading.

Why it matters

Short sale, deed in lieu, and foreclosure all can end occupancy. Only a short sale is an agreed market sale below the debt.

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Important note

A short sale requires approval. It is not an ordinary listing and not a foreclosure auction.

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