In real estate, a '''short sale''' is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale.

A short sale typically is executed to prevent a home foreclosure. Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. In short; A '''short sale''' is nothing more than negotiating with lien holders a '''payoff''' for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount.

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