In an effort to stop foreclosure or avoid foreclosure, a lot of people consider a short sale. As part of that consideration, the question arises "Will I still owe on my mortgage if I negotiate a short sale?" The plain straight forward answer is: maybe!

A short sale is where the mortgage lender agrees to accept and cancel its' mortgage for an amount of money less than the amount owed on its' mortgage. This situation occurs when a borrower is behind on his monthly mortgage payments, the borrower has found a buyer for his home, but the buyer is not willing to pay an amount large enough to payoff the borrower's mortgage. The borrower then asks his mortgage lender to accept less than the amount owed on the mortgage so that the borrower can sell his home. The lender either agrees or goes on with a foreclosure action.

Some mortgage lenders will agree to a short sale even though they are not required to. They agree to a short sale because it saves them money by not having to pay the legal costs of foreclosure, pay the up keep costs of maintaining the home until it is sold, or pay the costs of selling the home. Because there already is a willing and able buyer, the mortgage lender knows exactly what its losses are and doesn't have to spend any more money.

Since a mortgage lender is not required to accept short sales, a short sale is actually an agreement between you and your mortgage lender. As part of negotiating the agreement, your mortgage lender can require that you meet certain conditions.

For example, your mortgage lender can require that you sign a promissory note whereby you promise to pay your lender a certain amount, usually the amount of the difference between the amount actually owed and the amount being accepted. If you agree to sign a promissory note, you are promising to pay your mortgage lender, and your mortgage lender can sue you for the money.

Sometimes, because mortgage lenders are required to send you a W-9 (showing the amount of write off as income to you), a lender will allow you to promise to pay an amount less than the write off and then send you a W-9 for the balance.

The bottom line is that a short sale is an agreement between you and your lender. You must understand the terms and conditions of the agreement because your agreement will answer the question: "Will I still owe on my mortgage if I negotiate a short sale?"

This is general information only and not legal advice. If you need specific information or have any questions of any nature whatsoever, talk with a lawyer licensed in your state.

This article may be republished, but the wording must not be changed and the author links must remain active.

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