How to Pay the Difference on a Short Sale

A short sale is one alternative to a foreclosure. The term "short sale" means to sell a house for less than the mortgage owed. Depending on the lender, the difference between what is received from a short sale and what is owed on the mortgage may be forgiven. Although a short sale is one way to avoid the high costs of foreclosure, it is not without positive and negative consequences. As with any loan, you always want to contact your lender immediately and determine the best option for your financial situation.

Determine the difference owed on your short sale. If the short sale brings in $295,000 and the amount owed on your mortgage is $320,000, the loan deficiency (the difference owed on your short sale) is $25,000.

Ask for loan forgiveness. If the difference on the short sale is tens or even hundreds of thousands of dollars or more, consider negotiating with the lender to have the amount forgiven. This option may require the assistance of an attorney. Your credit score could be adversely affected, depending on how the lender reports the payment of the loan to the credit bureaus. According to a May 2009 article on, “If the lender agrees to a short sale, the rest of the homeowner's debt typically is forgiven.”

Make payment arrangements. Request a repayment plan if you cannot pay off your loan deficiency in one payment. Make a formal written request for your lender to hold a promissory note, which would allow you to make monthly payments over a specified term period.

Pay the difference in one sum. If your financial situation allows you to pay the difference in one sum, arrange a payment date and pay in full. Wait 4 to 12 weeks and then verify that the loan is reported as paid on your credit report.


  • Always confirm loan repayment and loan forgiveness agreements in writing. Debt cancellation is legal under the Mortgage Forgiveness Debt Relief Act and Debt Cancellation law.


  • Failure to repay a loan can negatively affect your credit score.