The Comprehensive Guide to

Passive Income Investing


Learn the secrets of how Paul Tracy generates over $XXX,XXX per month in passive income!

How to Become Financially Independent Through Passive Income Investing

What is a Mortgage Short Sale?

A mortgage short sale is the sale of a mortgaged property for less than the remaining value of the mortgage itself.

How Does a Mortgage Short Sale Work?

In a weak housing market, it is common for the outstanding mortgage balance on a property to exceed the market value of the property itself. In such cases, a property owner may ask the lender to agree to a mortgage short sale. If the lender agrees, the property is sold for its market value and the proceeds are used to repay as much of the mortgage balance as possible. In such an arrangement, the lender agrees to discount the remaining mortgage balance.

For example, suppose Bob wishes to sell his home once he discovers that its value has fallen significantly below the $100,000 mortgage balance. He puts the home on the market and gets an offer of $75,000. If the lender agrees to the transaction, Bob turns over all $75,000 of the sales proceeds to the bank, and the bank then writes off the $25,000 balance that remains.

Why Does a Mortgage Short Sale Matter?

Mortgage short sales can be a good option for homeowners who are underwater on their mortgage. Generally speaking, a lender will absolve the homeowner from any additional obligation once the short sale is completed.

In a mortgage short sale, the lender realizes a loss on the amount of the mortgage that does not get repaid. When this happens on a large scale, the underlying stability of the banking sector can be shaken.

Ask an Expert about Mortgage Short Sale

All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Mortgage Short Sale.

Be the first to ask a question

If you have a question about Mortgage Short Sale, then please ask Paul.

Ask a question
Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.