Mortgage Short Sale

AAA

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. Mortgage Forbearance Agreement

    An agreement made between a mortgage lender and delinquent borrower ...
  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 >>
  2. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  3. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
  4. How can an investor profit from a fall in the utilities sector?

    The utilities sector exhibits a high degree of stability compared to the broader market. This makes it best-suited for buy-and-hold ... Read Full Answer >>
  5. What is the difference between derivatives and options?

    Options are one category of derivatives. Other types of derivatives include futures contracts, swaps and forward contracts. ... Read Full Answer >>
  6. How are rights distributed in a rights offering?

    In a rights offering, rights are distributed to shareholders based on the number of shares they already own. What Is a Rights ... Read Full Answer >>
Related Articles
  1. Personal Finance

    Avoiding Foreclosure Scams

    If you want to save your home, avoid bogus offers and take matters into your own hands.
  2. Budgeting

    Mortgages: How Much Can You Afford?

    Answering this means number-crunching as well as factoring in other considerations and expenses.
  3. Budgeting

    Are You Living Too Close To The Edge?

    If a missed paycheck will make your finances cave in, you must learn how to make proper supports.
  4. Options & Futures

    Make A Risk-Based Mortgage Decision

    Find out how to choose which mortgage style is right for you.
  5. Home & Auto

    Mortgage Options For Underwater Homeowners

    Find out what options are available when your mortgage is greater than the value of your home.
  6. Active Trading Fundamentals

    Short Sales And Foreclosures: When It's Time To Move On

    Sometimes it's better to cut your losses, but foreclosures and short selling can have devastating impacts on your credit score.
  7. Personal Finance

    McMansion: A Closer Look At The Big House Trend

    The average home size is now 2,500 square feet - how big should you go?
  8. Investing Basics

    Explaining Gamma

    Gamma is a measurement of how fast the delta of an option’s price changes after a 1-point movement in the underlying security.
  9. Credit & Loans

    Don't Get Trapped in a Zombie Foreclosure

    Understand how foreclosures work and you can avoid the disastrous consequences of having a zombie foreclosure.
  10. Home & Auto

    How the Fed Affects Reverse Mortgages

    An in depth look at how the Federal Reserve affects reverse mortgages.

You May Also Like

Hot Definitions
  1. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  2. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  3. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  4. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  5. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  6. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!