: what is a short sale? A "short sale" occurs when a property is sold for less than the amount owed on the mortgage and the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured by the property upon receipt of less money than is actually owed. The lender is the party that comes up "short". Example: If the unpaid balance of a loan is $180,000 and the market value of the property is only $40,000, under a "short sale" the lender agrees to allow the property to be sold for $40,000, accepts the net proceeds in full satisfaction of the mortgage, and releases the mortgage lien on the property.