What typically happens if the homeowner sells their home through a short sale?

When a homeowner sells their home through a short sale, the sale typically involves the lender agreeing to accept less than the total amount owed on the mortgage. This situation often arises when the homeowner is experiencing financial difficulties and is unable to continue making mortgage payments, leading them to seek an alternative to foreclosure.

In a short sale, the lender may forgive the remaining debt after the home is sold, which means that the homeowner is released from the obligation to pay the shortfall between the sale price and the mortgage balance. This forgiveness can provide significant relief for the seller, allowing them to avoid the more damaging consequences of foreclosure on their credit report.

Since one of the main goals of a short sale is to mitigate the lender's potential loss and the homeowner's financial hardship, the agreement reached during this process often emphasizes debt forgiveness, making it a favorable resolution for both parties under distressed circumstances. This aspect is what sets short sales apart from outright foreclosures, where typically, the lender pursues the full amount owed, often leading to further financial consequences for the borrower.