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 Massachusetts, 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 accept the sale proceeds as full payment and waive their right to pursue the homeowner for the remaining balance. While this can release the homeowner from the mortgage debt, 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 consult with an attorney to understand the implications, negotiate with the lender, and ensure that the terms of the sale and any deficiency waiver are clearly documented to protect their interests.