A short sale is the sale of property that has accumulated more debt than its market value. For a short sale to occur, the lender must agree to accept less than the total amount owed on the property.
A short sale is complicated, however, and it’s common for sellers seeking a short sale to have more than one mortgage on the property and possibly additional liens for home improvement work, utilities and even overdue homeowners association payments. As a result, the buyer in a short sale should expect the process to take longer than the usual 30 days. In fact, depending on the number of debts the seller incurred, it could take as long as six months to close on a house in a short sale.
Short sales are often seen as a common last-resort option during tough economic times. In the Great Recession, the U.S. Treasury Department released guidelines and incentives to lenders to allow for short sales to take place easier and faster, in an effort to reduce the number of foreclosures occurring nationwide.