If a home is being sold for below what the current seller owes on the property—and the seller does not have other funds to make up the difference at closing—the sale is considered a short sale.
Selling Your Home for Less Than You Owe
The bank will discount the note allowing the seller to negotiate a price lower than the balance of the loan.
The Risks and Rewards of a Short Sale
A “Short Sale” is when the sale of the property does not net the seller enough funds to pay the full mortgage and the mortgage company discounts the note. These properties are often nearing foreclosure and the mortgage company would rather discount the mortgage than go through the costly and time consuming process to foreclose. […]