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 Arizona, 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 forfeit the right to pursue the homeowner for the remaining balance owed after the sale proceeds are applied to the mortgage debt. However, it's important to note that even with a deficiency waiver, a short sale can negatively affect the homeowner's credit score, potentially to the same extent as a foreclosure. Arizona law, under Arizona Revised Statutes Section 33-729(A) for purchase money mortgages (loans used to purchase the property) and Section 33-814(G) for non-purchase money mortgages, limits the ability of lenders to seek deficiency judgments after a short sale or foreclosure in certain circumstances. However, these protections may not apply if the property is not a single one-family or two-family dwelling. Homeowners considering a short sale should consult with an attorney to understand the specific implications for their situation.