What Is a Short Sale?
A short sale happens when a homeowner sells their property for less than the total amount owed on the mortgage. The lender agrees to accept this lower amount, typically because the homeowner is experiencing financial hardship and the home is worth less than what’s owed.

Rather than going through foreclosure, a short sale allows the homeowner to avoid a full-blown default and move on from the property.

You can learn more in detail here:
What is a Short Sale

> Why Do People Say It’s Bad?
Short sales get a bad reputation—and for understandable reasons. While they’re a useful alternative to foreclosure, there are definite drawbacks:

> Credit Damage
A short sale still affects your credit. While it may not be as damaging as a foreclosure, your score can drop significantly, especially if you’ve fallen behind on payments. See how it compares here:
Short Sale Credit Impact

> Long Approval Process
You can’t just decide to do a short sale on your own. Your lender has to approve everything—including the final offer. This can drag out the process for months.

> Possible Deficiency Judgments
In some states, lenders can pursue a “deficiency judgment,” which means they try to collect the remaining balance even after the sale. Homeowners should consult a local attorney to understand their state laws.

> No Cash from the Sale
Since the home is being sold for less than what’s owed, homeowners don’t receive any equity from the transaction.

> Tax Implications
Sometimes, the forgiven debt may be considered taxable income. While the IRS has made exceptions in the past, this is something you’ll need to discuss with a tax professional or CPA. Visit www.irs.gov for the latest guidance.

But Is It Always Bad?
Not necessarily. In fact, for many homeowners facing foreclosure, a short sale can be a smart way out. Here’s why:

 > It typically damages your credit less than a foreclosure

 > You may be eligible to buy a home again sooner

 > It helps you avoid the stigma and long-term effects of foreclosure

 > Some lenders even offer relocation assistance after the short sale is complete

If you’re wondering whether a short sale is right for you, this is a great place to start:
Stages of a Short Sale

Final Thoughts
A short sale isn’t ideal—but when you're behind on your mortgage and facing foreclosure, it can be the best of your available options. The key is understanding what’s involved and getting the right help early on. If you want a straightforward conversation about your options, our team is here to help.

Visit our homeowner support center to get started:
Short Sale Help for Homeowners