Mortgage Short Sale

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DEFINITION of 'Mortgage Short Sale'

The sale of a property by a financially distressed borrower for less than the outstanding mortgage balance due where the proceeds from the sale will be used to repay the lender. The lender then accepts the less-than-full repayment of the mortgage (and the borrower is released from the mortgage obligation) in order to avoid what would amount to larger losses for the lender if it were to foreclose on the mortgage.

INVESTOPEDIA EXPLAINS 'Mortgage Short Sale'

A mortgage short sale is one of several options other than foreclosure that might be available to a financially distressed borrower. Borrowers with temporary financial problems should try to negotiate a forbearance agreement with their lender. For borrowers with more lasting financial problems, in addition to a mortgage short sale, a deed in lieu of foreclosure or a short refinance might be potential options in avoiding foreclosure.

RELATED TERMS
  1. Foreclosure - FCL

    A situation in which a homeowner is unable to make principal ...
  2. Delinquent Mortgage

    A mortgage for which the borrower has failed to make payments ...
  3. Real Estate Short Sale

    Any sale of real estate that generates proceeds that are less ...
  4. Transfer of Mortgage

    A transaction where either the borrower or lender assigns an ...
  5. Serious Delinquency

    When a single-family mortgage is 90 days (or more) past due and ...
  6. Deed In Lieu Of Foreclosure

    A potential option taken by a mortgagor (a borrower) to avoid ...
RELATED FAQS
  1. Is it possible to short sell real estate?

    The traditional idea of a short sale is selling something you don't have so that you can buy it back at a lower price. The ... Read Full Answer >>
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