A short sale represents the sale of real property from which the proceeds of the sale does not cover the balance of debts secured by liens against the property. As a result, the property owner is unable to repay the full amounts of the liens against the property.
Thus, in a short sale, the lien holders agree to release their lien on the real estate and accept an amount that is less than the total amount owed on the debt. Any balance remaining that is owed to the creditors is referred to as a deficiency.
A short sale is often used as an alternative to foreclosure because it results in lower fees/costs to both the lender and borrower. However, both a foreclosure and a short sale result in negative credit reporting against the property owner.
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