What is a short sale?

A short sale is the sale of property at a price that provides net proceeds to the lender in an amount less than what is owed to them. The difference in what is owed to the bank and their net proceeds from the sale is referred to as the deficiency balance. Sometimes lenders will forgive the deficiency balance or a portion of the balance. Depending on the sellers’ ability to pay, the lender might require a cash contribution at closing. Other times they will expect to settle the remaining debt after the short sale closes.