What is a short sale?
When you owe more than the house is worth, a short sale is one way out. Here's how it works and what to ask for in writing.
No obligation. No pressure. Takes about 2 minutes.
The short answer
A short sale is selling your home for less than you owe on the mortgage, with your lender's approval. The lender agrees to take the sale proceeds even though they don't cover the full balance. You still have to find a buyer and move out, and you should ask the lender to waive any remaining balance in writing.
Step by step
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1
It starts with the lender
A short sale is a type of loss mitigation, so your lender or servicer has to approve it. Call your servicer and ask what it needs from you to consider one.
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2
Ask about the leftover balance
The gap between what you owe and the sale price is called a deficiency. The CFPB suggests asking the lender for a written waiver of any deficiency before the sale closes.
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3
Plan for taxes on forgiven debt
Canceled debt is generally taxable, and the lender may send you a Form 1099-C. The exclusion for debt on a main home covered discharges before January 1, 2026, or under a written agreement made before then; IRS Publication 4681 for 2025 says it doesn't apply after December 31, 2025. Other exclusions, like insolvency, can still apply, so ask a tax professional.
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4
Get a counselor in your corner
A HUD-approved housing counselor can lay a short sale out next to your other options. Find one with the CFPB's Find a Counselor tool or the HOPE Hotline at (888) 995-HOPE.
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5
Check whether you need one at all
If the house is worth more than you owe, a short sale isn't needed. A regular sale, cash or listed, pays off the loan and you keep the rest.
Sources: CFPB: What is a short sale? · IRS Topic No. 431: Canceled debt · IRS Publication 4681: Canceled Debts, Foreclosures, Repossessions, and Abandonments
This page explains the general rules. It isn't legal or tax advice. Talk to a housing counselor, attorney or tax professional about your own loan and tax situation.
Cash offer vs listing
Example: a $250,000 home
| Offer | $205,000 |
|---|---|
| Repairs | $0 |
| Commissions | $0 |
| Closing costs | $0 |
| You walk away with | $205,000 |
| In 7 to 14 days | |
| Sale price | $250,000 |
|---|---|
| Repairs | about $8,000 |
| Commissions | about $13,800 |
| Closing and holding | about $6,000 |
| You walk away with | about $222,200 |
| In 60 to 90 days | |
Example only. Your numbers depend on your home and market.
If you might have equity after all, we'll show you what a cash sale and a listing would each net, so you know whether a short sale is even necessary.
Frequently asked questions
Does a short sale wipe out the rest of what I owe?
Not automatically. Ask the lender for a written waiver of any deficiency before closing.
Do I owe tax on the amount the lender forgives?
It can be taxable. Canceled debt is generally income, the main-home exclusion covered discharges before 2026, and other exclusions such as insolvency may apply. Check with a tax professional.
Who finds the buyer in a short sale?
You do. The lender approves the deal, but finding a buyer is on you, and you'll need to move out.
Who are you?
We are real estate investors based in Baltimore, helping homeowners since 2016. We buy houses directly for cash. We are not a licensed real estate brokerage and do not list homes ourselves; if listing could get you more, we show you the math so you can choose.