A  SHORT SALE is a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan.
     It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property
     at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows
     them to avoid FORECLOSURE, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers.
     This agreement, however, does not necessarily release the borrower from the obligation to pay the remaining balance of the loan,
     known as the deficiency.
 

In a short sale, the bank or mortgage lender agrees to discount a loan balance because of an economic or financial hardship on the part of the borrower.  The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender.  Neither side is "doing the other a favor," a short sale is simply the most
economical solution to a problem.  Banks will incur a smaller financial loss than would result from foreclosure or continued non-payment. Borrowers are able to mitigate damage to their credit history, and partially control the debt.

A short sale is typically faster and less expensive   than a foreclosure.  It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer. Lenders often have loss mitigation departments that evaluate potential short sale transactions. The majority has pre-determined criteria for such transactions, but they may be open to offers, and their willingness varies.  A bank will typically determine the amount of equity (or lack thereof), by determining the probable selling price from an appraisal or Broker Price Opinion abbreviated BPO or BOV)
 Lenders may accept short sale offers or requests for short sales even if a Notice of Default has not been issued or recorded with the locality where the property is located.  Given the unprecedented and overwhelming number of losses that mortgage lenders have suffered from the 2009 foreclosure crisis, they are now more willing to accept short sales than ever before.
    

This presents an opportunity for "under-water" borrowers who owe more on their mortgage than their property is worth and are having trouble selling to avoid foreclosure as a result.
 

Short sales are different from foreclosures in that a foreclosure is forced by a lender, whereas both lender and borrower consent to a short sale.  However, this consent may change at any time, and negotiations may be ongoing between the lender and borrower even while the short sale is on the market.  The borrower may decide to remain and refinance their house, or become obstinate and force foreclosure.  The bank may renege as well if they decide to stick with the current borrower, or if they disapprove of the sale price.  Any short sale contract includes a contingency where the bank must approve the sale.

Changing consent can present a perilous situation for potential buyers.  It can waste considerable time and money for a prospective buyer who anticipated a sale.  Typically, deposits with the bank will be refunded but money for paid inspections or other services cannot be.There are several defenses against this.  If the seller has moved out of a property, that is a clue that they have no intention of staying or negotiating further with the bank.  "Bank Approved Short sales" are advertised by real estate advertisements, indicating that a real estate broker has verified the selling bank’s position.  This still does not guarantee acceptance, and it often does not take junior lien-holders into account, but it is better than situations where the bank holding the mortgage has only been lightly involved in the borrower’s decision.
 

Short sales are a type of settlement, and they adversely affect a person’s credit report, though the negative impact is significantly less than a foreclosure.  Like all entries except for bankruptcy, short sale does not show on a credit report according to Certified Distress Property Expert Institute.  The credit will restore within 18 months or so.  Depending upon other credit information, it is possible to obtain another mortgage 1-3 years after a short sale, or less if the borrower is current at the time of the sale.

 While lenders sometimes forgive the remaining loan balance, other lien-holders likely will not.  Further, it is possibly for a lender to omit updating mortgage balances zero balance after a short sale.  However, willfully misrepresenting information on a credit report can constitute libel in some jurisdictions, and lenders may be sued in civil court for engaging in this behavior.
 

Short Sale Rule means a Securities and Exchange Commission (SEC) trading regulation that restricted short sales of stock from being placed on a downtick in the market price of the shares. Short sales could only be permitted on upticks (last trade higher than the one before) or zero-plus ticks (last trade is the same as previous, which was an uptick). 

The regulation was passed in 1938 to prevent selling shares short into a declining market;
at the time market mechanisms and liquidity couldn’t be guaranteed to prevent panic share declines or outright  manipulation.  This regulation was rescinded in July 2007 by decree of the SEC; as a result short sales can occur (where eligible) on any price tick in the market, whether up or down.  The short sale rule was also known as the "plus-tick rule", "tick-test rule", or "uptick.
 

Due to the recent economic crisis, including rising unemployment, and drops in home prices in       Communities across the nation, the number of short sales is increasing.  Since a short sale generally costs the lender less than a foreclosure, it can be a viable way for a lender to minimize its losses. 

A short sale can also be the best option for homeowners who are "upside down" on mortgages because a short sale may not hurt their credit history as much as a foreclosure.  As a result, homeowners may qualify for another mortgage sooner once they get back on their feet financially.