Short Sale Terminology Short sale:  occurs when the borrower sells the property for less than what they actually owe, thus the term "short sale".

"Possible Short Sale":  This is a property that has been put on the market prior to getting the lenders approval for a short sale.  Most short sale contracts will include language that says:  "subject to lender (lien holder) approval"

Foreclosure:  Property is sold at a court ordered sale to settle the debt owed to a bank or individual.

Bank Owned Property:   a.k.a. REO (Real Estate Owned) property.  Property taken into the banks' inventory after a foreclosure sale.

Loss Mitigation Department:  Department at the bank that works with consumers on short sales, forbearance and loan modification agreements.  This department may also be called the Collateral or Work Out Department.

Foreclosure Department:  Department at the bank that oversees the foreclosure process once the borrower is in default.

Eviction Department:  Notifies homeowner of pending foreclosure and advises when they should vacate the property.  They may also hire third party companies to secure the property once vacant and maintain the property until sold.

PMI (Private Mortgage Insurance) Company:  The insurance company that will pay the lender in the event of your default.  Most PMI companies will have a say as to income/debt limits on your loan modification agreement and will have to approve the final agreement.

BPO:  This is typically a "drive-by" appraisal done by an area mortgage broker to determine the "market value" of the property that is the subject of the short sale.  Many times, these BPO's are inaccurate because they are "drive-by" only.  Most brokers doing the BPO will estimate the market value on the low side, due to the fact that they do not have complete information.

Mortgage Debt Relief Act:  The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.  Click the link for the skinny from -,,id=179414,00.html

Still have short sale questions?  Call me for information on Owensboro, KY area short sales, Karen Pannell, 270-903-2167

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Comment balloon 3 commentsKaren Pannell • December 05 2009 12:06PM


Karen, great information for buyers and sellers.

I would also add BPO  Broker's price opinion.

Posted by Anne Hensel, Realtor - Broker - St. Pete Beach, Treasure Island (South Beaches Real Estate Professionals) over 9 years ago

Great!  Thanks Anne!


Posted by Karen Pannell, Owensboro KY Real Estate -270-903-2167 Homes, Cond (Real Living / Home Realty) over 9 years ago

Karen, The short sale process can be a difficult process to understand even when you are in the business.  This is a good list for buyers and sellers.

Posted by Marchel Peterson, Spring TX Real Estate E-Pro (Results Realty) over 9 years ago