Homestead Realty Group

What is a Short Sale?

What is a "Short Sale”?

A short sale is a type of pre-foreclosure transaction, in which the owner sells the property for less than what is owed and then negotiates with some or all entities that have lien on title to the property to accept a lesser amount in exchange for a release of lien. Often times it is confused with a real estate owned (REO) sale which is a post-foreclosure sale. Short sale is a transaction the owner performs, REO sale is a transaction when the lender has taken over the property through foreclosure and are now the owners of the property.

What are some "Short Sale” alternatives?

•Deed in lieu of foreclosure

Some lenders may be willing to take a property into its REO portfolio rather than go through the foreclosure process. The deed in lieu option usually involves the lender’s forgiveness of the full amount of the dept. Keep in mind though that the lender may not consider a deed in lieu of foreclosure if there are junior lien holders: the foreclosure would wipe out the junior lien holders on title, whereas the junior lien holders would survive a voluntary deed in lieu.

•Loan Modification

A lender may be willing to rewrite the terms of the loan in order to bring it out of delinquency. Loan modifications often require a processing fee.


In the past year, both the federal and Massachusetts government have worked to develop programs that would allow certain borrowers at risk of default to refinance their homes via governmentally issued programs. The seller may be able to avail him/herself of such a program. If the seller wishes to retain their home rather than sell it, this would be a good option to research, especially with the new stimulus package that is about to be released.

For more information on the short sale process or any other questions, please do not hesitate to contact us.