Borrowers who are facing foreclosure may ask the lender to accept a discounted payoff on their loan. This is called a "short sale" of "short payoff." It allows the borrower to avoid a foreclosure action, and may offer the lender an expedited and less costly resolution of the situation.
Historical trends tell us that the number of short sales has increased when changing markets soften home prices and leave homeowners with a higher mortgage interest rate or loan balance. A short sale allows the borrower to maintain a better overall credit record than with a foreclosure. It also allows time for the homeowner to relocate on a more convenient timetable instead of facing eviction and possible a deficiency judgment down the road. A short sale may impact the borrower's tax situation, so a tax advisor should be consulted.
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