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 Indiana, 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 owed after the sale proceeds are applied to the mortgage debt. While this can provide relief from the debt obligation, it is important to note that a short sale can still negatively affect the homeowner's credit score, potentially to the same extent as a foreclosure. Indiana does not have specific statutes that govern short sales; they are instead handled through negotiation between the homeowner and the lender, often with the assistance of an attorney to navigate the complex process and negotiate terms with the lender. It's also important for homeowners to be aware that there may be tax implications, as forgiven debt can sometimes be considered taxable income, although there are exceptions and exclusions that may apply.