A short sale is an "arrangement" between the current owner of a home and the bank that lent them the money to buy their home to accept an offer for less than the total amount owed to pay off the home. The "deficiency" is the difference between the amount owed and what the bank collects at the short sale.
Basically the seller has decided to lower their home’s sale price to a level that is less than what they owe the mortgage company. This is not a foreclosure, where the seller has stopped making payments and the bank repossesses the home and sells it, and in many cases will pursue the homeowner for the deficiency.
In the case of a ‘short sale’ the bank or mortgage company works with the homeowner, or their professional REALTOR to accept an amount less than the principal balance on their mortgage in order to alleviate the necessity for the bank to foreclose and try and sell the property on their own.
With the adjustment of the real estate market last year, short sales have become more commonplace. If you feel you are in a situation that could warrant considering a short sale, please contact an experienced REALTOR to help you navigate this cumbersome process that can take several months longer to close once a contract has been agreed upon.