A short sale in the real property (real estate) context—also known as a pre-foreclosure sale—is made when a homeowner sells their home for less than the balance due on the mortgage loan after the lender (bank) agrees to accept the lower amount in full satisfaction of the loan balance (a deficiency waiver).

Although the bank may waive its right to recover the balance or deficiency from you after the proceeds of a short sale are applied to your loan balance, a short sale will usually have a negative impact on your credit score—often as much as a foreclosure.

In Delaware, a short sale occurs when a homeowner sells their property for an amount less than what is owed on the mortgage, with the lender's approval. The lender may agree to a deficiency waiver, which means they forfeit the right to pursue the homeowner for the remaining balance of the loan. While this can provide relief from the debt obligation, it is important to note that a short sale typically has a detrimental effect on the homeowner's credit score, similar to the impact of a foreclosure. Homeowners considering a short sale should be aware that the process requires lender approval, and they may need to demonstrate financial hardship to qualify. Additionally, there may be tax implications, as forgiven debt can sometimes be considered taxable income. It is advisable for homeowners to consult with an attorney and a tax professional before proceeding with a short sale to fully understand the legal and financial consequences.