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A “Short Sale” is the sale of a property at a price below the encumbrances (e.g.,
loans) recorded against the property. As an example, if one owes $500,000 on a home
that is sells for $450,000, the transaction is a short sale.
A short sale requires the consent of each lender whose interest is compromised by
the sale. Generally, the more loans in the mix, the more difficult it will generally
be to complete the sale. Moreover, a lender’s consent to a short sale does not necessarily
mean that the lender is forgiving the debt. It is common for a seller of a home in
a short sale transaction to be contacted by a former junior lien holder asking for
payment on the loan. Moreover, many short sales result in taxable income to the seller,
especially if the property sold was an investment property or second home.