The Basics
A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender and in others, the homeowner must make arrangements with the lender to settle the remainder of the debt. (National Association of Realtors)
For example, if your mortgage is $200,00 but your home is worth $150,000, you are $50,000 short, not including the costs to close (commissions, recording fees, title and or escrow charges.) A negotiation process needs to take place to get the bank to agree to forgive the $50,000+ difference in the mortgage amount and to agree to pay all of the fees and costs to close the sale.
