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Real property

short sale

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 Missouri, 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. However, it's important to note that even with a deficiency waiver, a short sale can still negatively affect the homeowner's credit score, potentially to the same extent as a foreclosure. The specific impact on credit can vary based on individual circumstances and the credit reporting agency's policies. Homeowners considering a short sale should consult with an attorney to understand the legal and financial implications, including potential tax consequences, as the forgiven debt may be considered taxable income under certain conditions.

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Real property

short sale

Individual & Family Legal Plan

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Missouri State Code

Real property

short sale

Missouri State Code

Articles