What is a short sale? A short sale is an alternative to a foreclosure, the legal process where a lender seeks to recover the balance of a loan. In a short sale, the lender and borrower agree on a payoff of less than the balance due on the loan.
Investopedia defines a short sale as: “Any sale of real estate that generates proceeds that are less than the amount owed on the property. A real estate short sale occurs when the lender and borrower decide that selling the property and absorbing a moderate loss is preferable to having the borrower default on the loan. It is therefore an alternative to foreclosure.”
While being an alternative to a foreclosure, there are downsides, such as negative consequences to your credit score. Credit Sesame has laid out the details and pros and cons in the infographic below: