A short sale is a pre-foreclosure sale that takes place when a home is sold for less than the amount owed on the mortgage. The mortgage company agrees to allow the homeowner to sell the home and pay off the mortgage balance.
To consider a short sale foreclosure, the homeowner must not be eligible for refinancing the mortgage loan. A long-term hardship and being behind on payments are also situations in which a short sale becomes an option.
A short sale does not have the same negative impacts that a foreclosure would have on the ability of the homeowner to purchase another home in the future.