Short Sale

Real Estate

A short sale is selling a property for less than the mortgage balance, with lender approval to accept the shortfall. Used when owner can no longer afford the mortgage but property value has declined below loan balance. Process: hardship documentation, listing with experienced agent, buyer offer, lender approval (often slow, 60-120 days). Less damaging to credit than foreclosure (typically 100 point drop vs. 200+). Tax consequence: forgiven debt may be taxable as ordinary income unless excluded under Mortgage Forgiveness Debt Relief Act. Buyer perspective: short sales offer below-market prices but require patience for lender approval and accepting properties as-is.