Short sale
A sale of a home for less than the mortgage balance, approved by the lender, used when an owner in trouble has little or no equity.
Definition
A short sale is a sale of a home for less than the amount owed on the mortgage, with the lender's approval. The lender agrees to accept the sale proceeds and release its lien even though the loan is not paid in full.
Short sales happen when an owner in financial trouble has little or no equity. The lender reviews the owner's hardship, finances and the buyer's offer, and approval can take weeks or months. Every lienholder, including a second mortgage, has to agree to release. In some states the lender can still pursue the borrower for the deficiency after a short sale, so the CFPB suggests asking the lender to waive it. For investors, short sales take patience and a clean, documented offer. Lenders often require an arm's-length affidavit and restrict quick resales, which limits wholesale exits.
Source: consumerfinance.gov
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