
A short sale happens when a homeowner sells their property for less than the amount owed on the mortgage, with the lender’s approval.
The lender agrees to accept the sale proceeds as full or partial payment of the debt — and in most cases also pays the normal selling costs such as agent commissions, title fees, and closing expenses.
Result: The seller usually has no out-of-pocket costs.
Sarah owes $350,000 on her mortgage, but her home’s current market value is only $280,000.
After losing her job, she can no longer afford her monthly payments.
Through a short sale, she sells the home for $275,000.
Her lender agrees to accept that amount, forgive the remaining $75,000 balance, and cover the typical closing costs so Sarah can move forward without added expense.
Short sales can be a solution for homeowners in a variety of financial or life situations.
Option | Credit Impact | Timeframe | Key Advantages | Key Disadvantages |
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Sell property for less than mortgage balance with lender approval | Moderate (50-150 points) | 3-6 months |
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Lender takes possession of property through legal process | Severe (200-300 points) | 3-18 months |
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Voluntarily transfer property deed to lender | Moderate (50-125 points) | 2-4 months |
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Negotiate changed terms with current lender | Minimal if successful | 2-6 months |
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A step-by-step guide through the short sale process, typically taking 3–6 months to complete. Each step builds toward lender approval and closing.
Lenders require documentation to confirm hardship and property value before approving a short sale.