A Short Sale allows you to sell your home and the servicer agrees to forgive any shortfall between the sale price and the mortgage balance. Thus a “short” sale. This approach avoids a damaging foreclosure entry on your credit report.

The difference between a Promissory Note and a Mortgage is that a Promissory Note is a promise to pay back the loan. A Mortgage is the collateral document of the loan—if you don’t pay the Promissory Note, then it is paid with the Mortgage.

In the case of a foreclosure, the homeowner takes a credit hit, and the Promissory Note is still out there, so the lender can still come after the homeowner. The advantage of a short sale is that the homeowner avoids foreclosure and the Promissory Note is no longer an issue.

A short sale is better for a homeowner than a foreclosure because it is better on the homeowner’s credit, and avoids a deficiency and judgment that’s good for 20 years! We want the lender to forgive the deficit, and enable the homeowner to move to a place where he or she can be comfortable with the payments.