In a short sale, what is agreed upon by the bank?

In a short sale, the bank agrees to accept the selling price of the property, even if that price is less than the amount owed on the mortgage. This is crucial because it allows the homeowner to sell the property and avoid foreclosure when they are unable to repay their debts. The decision by the bank to accept a lower sale price is typically based on their assessment that it is in their best interest to recover some of the owed funds rather than risk the potentially greater losses associated with foreclosure.

This decision can be a win-win situation because it allows the homeowner to resolve their financial distress while the bank mitigates losses by receiving at least a portion of the amount owed. Therefore, the essence of a short sale revolves around the bank's acceptance of a selling price that falls short of the original mortgage balance.