A “Short Sale” is simply when a seller sells a property for less than what the total mortgage is.  In these cases the lender negotiates a short payoff, or said another way the lender takes less than what is owed.

For a lender to take less than what is owed they will require several things.
 

• Borrower must demonstrate they are in a financial hardship.
• That they do not have the ability to continue to pay the mortgage.
• That they do not have other liquid assets (i.e. 401k, etc.) that they can make up the difference with.
• The lower value must be determined by outside sources.  The lender will make arrangements to have a Broker Price Opinion or appraisal completed.

If acceptable by the lender then the lender will pay normal closing costs and brokerage fees.  Plus it’s important to know that the borrower will get a 1099 for any amount of short payoff.