Short selling a house is a process where the homeowner works closely with his lender or multiple lenders to sell a home at or near market value when the market value is less than the total amounts owed on the property.

The lender is agreeing to accept a “shortage of funds” or “short pay off” to satisfy the dept.

Example: If homes in your neighborhood are selling for $200,000 (market value) and you owe $300,000 on a similar home, you will not be able to sell your home for what you owe and will have to get the lender to agree to a short sale.

You cannot short sale a property unless all lenders agree to the short pay off. Generally you must suffer some hardship that requires you to sell or be in “default” on your loan before a lender will consider a short sale.

Sometimes short sales may be a bargain for investors or home buyers. It all depends on the condition of the home and the lender’s motivation to avoid a foreclosure.