A short sale in the real property (real estate) context—also known as a pre-foreclosure sale—is made when a homeowner sells their home for less than the balance due on the mortgage loan after the lender (bank) agrees to accept the lower amount in full satisfaction of the loan balance (a deficiency waiver).
Although the bank may waive its right to recover the balance or deficiency from you after the proceeds of a short sale are applied to your loan balance, a short sale will usually have a negative impact on your credit score—often as much as a foreclosure.
In Arkansas, a short sale occurs when a homeowner sells their property for an amount less than what is owed on the mortgage, with the lender's approval. The lender may agree to a deficiency waiver, which means they accept the sale proceeds as full payment for the loan, even though it's less than the owed balance. This agreement prevents the lender from pursuing the homeowner for the remaining debt. However, it's important to note that a short sale can significantly affect the homeowner's credit score, potentially as much as a foreclosure would. The specific impact on credit varies depending on individual circumstances and the credit reporting agency's policies. Homeowners considering a short sale should consult with an attorney to understand the legal and financial implications specific to Arkansas law and to navigate the complex process.