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Glossary of Short Sale Terms


NOTE: The information herein is deemed reliable but not guaranteed.   This is meant to be an overview of terms, not legal advice.  Please consult an attorney or accountant before making any decisions based on this or any other information.




An opinion of the value of the real property.


Assessed Value

The County Tax assessor’s opinion of value used for the purpose of computing property taxes.



A legal procedure that may permit borrowers to restructure or possibly clear debt obligations. A bankruptcy stops the foreclosure process until the bankruptcy process is completed or the court allows the lender to resume the foreclosure.


Bankruptcy-Chapter 7

Often called a straight bankruptcy-involves the liquidation of all non-exempt assets by the bankruptcy trustee, who in turn distributes the proceeds to qualified creditors. All dischargeable debts are discharged and the person(s) filing receive a “fresh start”.


Bankruptcy-Chapter 13

Often called debt reorganization. A Chapter 13 Bankruptcy is generally appropriate for those individuals who have non-exempt property they wish to retain and who have enough income to reasonably pay the reorganized debt after covering reasonable living expenses.



The beneficiary in a foreclosure context is generally the mortgage lender. Frequently referred to as the ‘Benny’.


Broker's Price Opinion (BPO).

A BPO is a property valuation in which sales prices of similar properties are used as the basis for arriving at a value estimate. Institutional sellers often rely on a BPO prepared by a real estate agent/broker and a professional appraisal prepared by a certified appraiser to determine the listing price or allow a short sale to proceed.


Certified Funds

Same as cash. Buyer's monies must be placed in escrow prior to closing the sales transaction. Certified funds are most often in the form of a Certified Check.



The final accounting of the real estate sale before title is transferred at the recorder’s office. The Closing Statement outlines the proceeds and costs on both the buyer’s and the seller's side of the transaction.


Comparative Market Analysis (CMA)

The CMA is a valuation technique in which sales prices of similar properties are used as the basis for determining an estimate of value.  Real estate brokers and agents typically provide CMA’s to the listing clients. It is not an appraisal.



Conditions or events which must be satisfied or removed before a contract becomes enforceable.   In other words, these are “escape clauses” that typically allow the Buyer to cancel the contract, without penalty.    Once contingencies are all removed, the contract becomes enforceable.



A promise by two or more parties to perform, or refrain from performing, some specified act(s) in exchange for a lawful consideration like money.


Credit Counseling

Under the bankruptcy law those wishing to file bankruptcy must complete an approved credit-counseling course within the six (6) months prior to filing.


Deed in Lieu of Foreclosure

A “deed in lieu” is a voluntary conveyance of title by the owner in exchange for the discharge of the mortgage debt.  Typically, the house is free of other liens and the owner must have clear title.  In simple terms, the borrower agrees to transfer title to the property to the lender, who accepts the property in exchange for the total debt. The voluntary surrender of the property eliminates the need to continue foreclosure action by the lien holder. The lien holder can refuse to accept the Deed in Lieu and file a Notice of Non-Acceptance with the County Recorder.


Deed of Trust

A legal document that dictates the terms of a loan and transfers the ownership of the property to a third party called a trustee until the loan has been paid in full.



Occurs when the borrower does not meet its legal obligations according to the loan terms in the deed of trust.


Default Judgment

A court decision against someone because they failed to respond.  For example, failure to appear in court or to respond to a document.


Deficiency Judgment

A court decision requiring a borrower to pay the lender the difference between the mortgage balance and the amount realized at the foreclosure sale.


Discounted Payoff

The payoff of a mortgage loan where the lender accepts an amount less than the actual amount owed to pay off the loan.


Earnest Money

Accompanies an offer to purchase as a "good faith" gesture of the buyer's serious intent to fulfill the contract.



The deposit of funds with a bonded, neutral third party such as a title company, with instructions to carry out the provisions of a contract.


Equity Deficient

A property is Equity Deficient when, if sold, sales proceeds would not fully pay off existing mortgage debt.


Fee Simple      

Complete ownership of a property, subject only to the powers of the government.


Federal Housing Administration (FHA)

Federal agency that administers FHA insured loans.


Federal Tax Lien         

A lien filed by the federal government as the result of an outstanding tax liability.



Federal National Mortgage Association commonly known as "Fannie Mae", is an agency which buys loans from banks. Due to its size, Fannie Mae Foreclosures make up a significant percentage of the REO (Real Estate Owned) in our current market inventory.



Federal Home Loan Mortgage Corporation also known as "Freddie Mac", is an agency performing function to Fannie Mae. Special financing is offered on a similar many Freddie Mac Foreclosures.


Forbearance Agreement

Under a forbearance agreement, the lender agrees to stop the foreclosure process and determines payment terms that, at a certain time, will bring the borrower current or in compliance with the note.



A forced sale of property due to delinquency in mortgage payments. A foreclosure sale terminates all rights of the mortgagor. Foreclosure is a legal process in which a lender attempts to recover the amount owed on a defaulted loan through selling the property. The lender has the option of selling the property or repossessing the property. The beginning of a foreclosure process starts after a borrower defaults on mortgage payments and the lender files a Notice of Default.



Government National Mortgage Association, commonly called Ginnie Mae, is an agency that is active in the secondary mortgage market. They deal in the sale of VA and FHA mortgages.



Home Affordable Modification Program.  If you can no longer afford to make your monthly loan payments, you may qualify for a loan modification to make your monthly mortgage payment more affordable. Millions of borrowers who are current, but having difficulty making their payments, and borrowers who have already missed one or more payments may be eligible.



Home Affordable Foreclosure Alternatives program was introduced to compliment the HAMP program since only a small percentage of homeowners were able to qualify for the HAMP program. The HAFA program is available to borrowers who failed to qualify for the HAMP program and may serve well to protect borrowers who are current with their mortgage payments but can’t continue to make their payments under the existing terms of the note. Utilization of the HAFA program may shorten the short sale process and completely forgive the debt to the lender. The difference between a normal short sale and the HAFA program is the lender is completely on board and willing to accept a lesser amount (with incentives from the Federal Government) and to work with the property owner to avoid the more expensive foreclosure process.



Common abbreviation used for the Department of Housing and Urban Development, an agency that oversees FHA. FHA foreclosures are usually called HUD Homes.


Involuntary Lien            

A lien filed against a property without the owner's consent due to items such as taxes, special assessments, federal income taxes, etc., owing to a third party


Judicial Foreclosure

A foreclosure action conducted through the courts instead of through a foreclosure trustee. Judicial Foreclosures are uncommon in California, particularly on residential properties. Should a lender elect to pursue a Deficiency Judgment, it would be through a Judicial Foreclosure.


Junior Lien

Often a second mortgage,  this is a mortgage loan that is subordinate to a Senior Lien or a first mortgage. Lien priority is generally established by order of recordation. NOTE if you refinance a first mortgage on a property with a second mortgage already in place, the new first mortgage holder will require a subordination agreement from Junior Lien holders to legally establish the new mortgage holder as first or Senior Position.


LIBOR (London Interbank Offered Rate)

The interest rate charged among banks for short-term Eurodollars loans - LIBOR is a very common index for adjustable rate mortgages (ARM).



A legal claim filed against the title of a property and the property owner by a lender or other entity called the lien holder. This represents an encumbrance on the title using the property as security for the payment of a debt or obligation of the property owner. 


Lis Pendens     

A publicly recorded notice of a pending lawsuit against a property owner that may affect the ownership of a property.  This process is required in a few states to begin the foreclosure process if a borrower is in default. The term is Latin for "suit pending.” This may refer to any pending lawsuit or to a specific situation with a public notice of litigation that has been recorded in the same location where the title of real property has been recorded.


Loss Mitigation

Home mortgage lenders try to limit losses on delinquent mortgages by working out solutions with borrowers through their Loss Mitigation Departments.


Mechanic's Lien

A lien placed on property by laborers or material suppliers who have contributed to an improvement.


Mortgage Modification

An agreement in which a lender agrees to modify any or some of the terms of the mortgage. This is a process in which an existing note is modified, but not cancelled. Changes may include extending the term of the loan, changing the monthly payments, changing the interest rate, etc.



A temporary conditional pledge of a property to a creditor as security for performance of an obligation to repay a debt.



The lender.



The borrower.



Multiple Listing Services run by local Realtor associations.


Notice of Default (NOD)

A publicly recorded notice stating that a property owner is behind scheduled loan payments for a loan secured by a property.   This official notice is filed and recorded by a designated trustee at the request of a lender indicating the mortgage lender has commenced foreclosure action.


Notice of Trustee Sale

An official notice that is posted, mailed, published/advertised and recorded by a trustee at the direction of lender indicating the lender’s intention to sell the property at public auction. The notice includes a specific date, time and location.



A charge made by the lender for loaning money. One point equals one percent of the loan.



A copy of the notice of sale must be posted in a conspicuous place on the property to be sold at least twenty days before the sale. Also, a copy of the notice must be posted at one public place in the city where the property is to be sold at least twenty days before the sale.



Trustee Sales may be postponed at the direction of the lien holder. Notice may be given in advance or at the time and location specified for the intended sale.


Portfolio Loan 

Loan originated and held in house as part of a lender's investments.



Period between when a borrower becomes delinquent and the property is foreclosed upon.



A person acting for him/herself in a transaction. The principal is also the amount of a loan exclusive of interest.


Private Mortgage Insurance (PMI)       

A policy of insurance paid for by the borrower to protect the lender in the event the borrower defaults on the mortgage.  The policy is payable to a lender or trustee for a pool of securities that may be required when taking out a mortgage loan.  It is insurance to offset losses in case a mortgagor is not able to repay the loan and the lender is not able to recover its costs after foreclosure and sale of the mortgaged property.   Typically, the mortgage holder requires PMI when the down payment is less than 20% of the purchase price.



Process of demonstrating a person is credit worthy and has enough money to buy a property.


Qualifying Funds

In order to bid at a Trustee Sale bidder must have qualifying funds available at the sale. Qualifying funds are cash or cashiers check drawn by a qualified and recognized Bank.


Quiet Title       

Legal process to eliminate title problems.



A form of deed in which the grantor is giving the grantee rights to a property but the grantor makes no warranties about rights others may have.



A broker or sales agent who is a member of a local real estate board affiliated with the National Association of Realtors (NAR).


REO (Real Estate Owned)

A class of property owned by a lender, typically a bank, after an unsuccessful sale at a foreclosure auction.  When a mortgage lender acquires a property, typically through foreclosure, it becomes known as real estate owned – or REO.



Occurs when the property owner pays off the amount in default to bring the loan payments current in order to stop the foreclosure process and return to the original terms of a loan.


Right of Redemption    

Right to buy a property back for a limited period of time (usually 10 days) after a foreclosure sale.


Secondary Mortgage Market   

Fannie Mae, Freddie Mac, Ginnie Mae were originally chartered by the federal government to stimulate the economy by either buying or recycling packages of loans from financial institutions.


Short Sale

(Also called "Short Pay" or "Pay Off") A process in which a lender agrees to receive a lower amount of an owed debt in exchange for the sale of the property to a third party.   The sale is completed through negotiation with the existing lender in which the lender agrees to accept less than the full amount owed to satisfy the debt allowing the debt to be “paid off”, short.  In cases of second mortgages, the process requires the cooperation of both lenders.



Evidence that a person is entitled to the lawful possession of a property or estate.  Evidence that an owner is in lawful possession of a written instrument evidencing ownership.


Title Insurance

A guarantee underwritten by a title company to protect a property owner against loss if the title is imperfect.


Title Search

Process to determine validity of the ownership or title to real estate. Assures the title conveyed is good and possession will be undisturbed.


Trustee (Foreclosure Trustee)

Foreclosure Trustees are appointed by the lien holder when a mortgage reaches the default status for the purpose of processing the foreclosure.


Trustee Deed

The trustee deed is awarded to the highest bidder at auction or the foreclosing lender upon completion of the foreclosure.


Trustee Sale

The Trustee conducts trustee sales. The property is sold at auction to the highest bidder, or taken back by a foreclosing lender if there isn’t a bid in excess of the note and the lender’s costs.


Warranty Deed

Assures the title conveyed is good and possession will be undisturbed.



An IRS form issued by a creditor to who is canceling all or part of a debt, to the person receiving debt relief.


Vanguard Real Estate Group

Bay Area Offices:

Walnut Creek & San Carlos

 Email or call 925.279.1190 for an appointment

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