Short Sale: a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s mortgage.
For example: Bob Owes $400,000 on his home. It is worth $200,000. Bob cannot afford his mortgage payments and needs to let go of the house but does not want a foreclosure on his credit history. Bob opts to short sale. He contacts a Realtor who lists his home at $180,000. Buyer Joe thinks this is a great deal and writes an offer. This is the point where Bob’s realtor begins to negotiate with the bank to sell the home for less than the $400,000 owed. If the bank agrees Bob sells his house for less than it is worth and Joe has bought a short sale.
