What is a SHORT SALE?

What is a short sale? What is short about it? Glad you asked. According to a Keller Williams Realty expert, Leah Wolfe-Kraemer, a short sale, or short payoff, occurs in a real estate transaction when a lienholder (bank) agrees to accept less than what the seller owes in exchange for releasing the lien on the property and satisfying the debt. In other words, the agreed payoff is less than the seller owes.

And why, you ask, might a bank accept less than what the seller owes them? Well, the banking industry is much too complicated for a short answer, but the biggest reason is that it is better for the bank than letting a property go through the foreclosure process. The entire foreclosure process is extremely time-consuming and expensive for a bank, and at the end, the property will still sell for much less than the amount owed. By granting short sales, the bank can bypass most of the foreclosure process.