A short sale
is when you sell a home and the proceeds from the sale won’t cover what is owed, and the property owner cannot afford to pay the difference. The lender then agrees to release their lien on the home and accept the amount the buyer is offering. Any left over balance owed to the creditors is known as a deficiency. Short sale agreements do not always release borrowers from their obligations.
A short sale is often used to avoid foreclosure because it is cheaper for the borrower and for the lender. A short sale will result in a negative credit report against the property owner. Doing a short sale can also have tax repercussions. Always consult an accountant or attorney before making the decision to do a short sale.