What is a short sale? Start here.

The short answer

A short sale is a home sale for less than the outstanding mortgage amount, with the lender or servicer agreeing to the transaction. It may be considered when a sale cannot generate enough to pay the mortgage and keeping the home is not workable. It is not an automatic right or a guaranteed alternative to foreclosure.

Three approvals are not the same

A buyer agreeing to buy, a seller accepting an offer, and a lender approving a short sale are separate events. Other lienholders may also need to consent. Marketing a home as a short sale does not prove the transaction can close.

Read the numbers before deciding a short sale is needed

The asking price alone cannot answer the question. Ask your agent and escrow officer to prepare a dated estimate that identifies the sale price, proposed costs and amounts needed to resolve the debts and claims affecting closing. Keep estimates separate from documents that confirm what a creditor has actually agreed to accept.

Four figures that answer different questions

1. The offer price: what a buyer proposes to pay. A higher offer can still produce different proceeds if credits, costs or other terms change. Ask for those assumptions to be shown rather than comparing price alone.
2. The mortgage payoff amount: the amount needed to pay the loan in full through a specified date. CFPB explains that it differs from the current balance because it includes interest through that date and may include unpaid fees. Request the applicable payoff information from the servicer; do not use an online balance as a substitute.
3. The estimated closing costs and adjustments: the proposed charges, credits and other items in the closing calculation. Ask who pays each item, what is confirmed and what remains an estimate. Do not assume a generic fee percentage fits your transaction.
4. The proposed amount to each creditor: what the transaction would make available for that creditor after the other agreed closing items. A calculation proposing less than full payoff is not the creditor's consent to accept it. The written short sale approval and its conditions must be reviewed separately.

Ask what “net proceeds” means on the particular worksheet: the amount available for mortgage debt, the proposed payment to one creditor, or money remaining for the seller. Have the preparer label the figure so the same phrase is not used for different amounts.

A hypothetical gap, not a bill or a promise

Six questions before relying on an estimate

1. Which date does each number use? Record the worksheet date, intended closing date and the date covered by the payoff quote. If closing moves, ask which figures need updating.
2. Where did the payoff come from? Identify the servicer's dated statement and any unclear interest, fee or other line item. Request an explanation of a discrepancy rather than adjusting the figure yourself.
3. What costs and credits are included? Ask the preparer to explain the proposed seller charges, buyer credits and adjustments, including any item that could change. Check that an amount has not been counted twice.
4. What else affects closing? Ask the title and escrow professionals which additional mortgages, liens or other claims need attention. A first-mortgage calculation is not a substitute for that review. See the title-report questions.
5. What has each creditor accepted? Mark proposed payments and unresolved approvals clearly. Ask your agent, escrow officer and servicer to reconcile the estimate with the actual written approval, including allowed costs. Have a California attorney review any unclear payment obligation.
6. What changes require another review? A revised offer, credit, cost or closing date may change the calculation. Ask who will update the worksheet and obtain any needed written confirmation. Keep the previous version so the change is visible.

Keep one private estimate note

For each important figure, record its description, amount, source document and date, whether it is estimated or confirmed, and who will resolve an open question. Use “unknown” rather than zero for an amount that has not been confirmed. Store the underlying records securely. Do not put account numbers or sensitive documents in this website or a broadly shared checklist.

When the numbers are ready, compare your options for staying or selling and use the written-approval review before relying on a proposed closing. A worksheet cannot determine debt liability or tax treatment, and preparing one does not change a foreclosure deadline.

Estimate checklist expanded and primary sources checked November 9, 2026. General seller education. The example is invented for explanation and is not a fee quote, valuation or individual financial recommendation.

Questions to take to your servicer

• What home-retention options are available for my specific loan?
• What does your short sale review require, and how should I submit it securely?
• Who handles the file, and how can I confirm documents were received?
• Are there foreclosure deadlines I need to address separately?
• What will the written approval say about the remaining debt?

What a short sale does not promise

Do not assume it prevents credit damage, eliminates every debt, removes tax exposure, or stops foreclosure activity. The consequences depend on your facts and applicable rules. Consult appropriate legal and tax professionals before signing final terms.

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