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 New Jersey, a short sale occurs when a homeowner sells their property for less than the amount 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 to homeowners who are unable to keep up with mortgage payments and wish to avoid foreclosure, it is important to note that a short sale can still significantly affect the homeowner's credit score, potentially as much as a foreclosure would. Homeowners considering a short sale should consult with an attorney to understand the implications and to navigate the complex process, which includes obtaining lender approval, handling potential tax consequences, and negotiating the terms of the sale.