What is "short sale"

n. 1 (context real estate English) A property sale negotiated with a mortgage company in which a lender takes less than the total amount due. 2 (context investments English) A sale of a security that one does not own, delivery obligation met by borrowing the security from another owner (usually in the hope that the price will decrease before the loan must be repaid). 3 (context economics English) A sale of a financial security, commodity, or other good that one does not own with the contractual obligation to make delivery of the good to the buyer at a date in the future.

n. sale of securities or commodity futures not owned by the seller (who hopes to buy them back later at a lower price) [syn: short selling]

Short sale may refer to:

• Short (finance), the practice of selling securities or other financial instruments, with the intention of subsequently repurchasing them at a lower price
• Short sale (real estate), a sale of real estate in which the proceeds from selling the property is less than the amount owed

A short sale is a sale of real estate in which the net proceeds from selling the property will fall short of the debts secured by liens against the property. In this case, if all lien holders agree to accept less than the amount owed on the debt, a sale of the property can be accomplished. Creditors holding liens against real estate can include primary mortgages, second mortgages, home equity lines of credit ( HELOC), homeowner association liens, mechanics liens, IRS and State Tax Liens, all of which will need to approve the sale in return for being paid less than the amount they are owed. The lien holders do not have to agree to accept less, but they often do since the alternative is to let the property go to foreclosure.

A short sale is a more beneficial alternative to foreclosure and has become commonplace in the United States since the 2007 real estate recession. Other countries have similar procedures. For instance, in the UK the process is called Assisted Voluntary Sale. While both short sale and foreclosure result in negative credit reporting against the property owner, because the owner acted more responsibly and proactively by selling short, credit impact is less.