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Short Sales (Pre-Foreclosures)
A short sale is real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property. The property owner cannot afford to repay the total amount of the liens against the property, therefore the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt. Any unpaid balance owed to the creditors is known as a deficiency. Short sale agreements do not necessarily release borrowers from their obligations to repay any deficiencies, unless specifically agreed to between the parties.
A short sale is often used as an alternative to foreclosure, which mitigates additional fees and costs to both the creditor and borrower. A short sale will often result in a negative credit report against the property owner, however it is less damaging than a foreclosure report.