Short Sale
A sale in which the anticipated proceeds will not satisfy the secured debt, so every lienholder must approve the closing.
Quick flashcard
What does Short Sale mean on the Texas real estate exam?
Answer: A sale in which the anticipated proceeds will not satisfy the secured debt, so every lienholder must approve the closing.
Read the explanation below, then return to the full flashcard deck and try it again from memory.
Short Sale definition
In a short sale the seller still owns the property and is still under contract, but the sale price will not cover the payoff on the liens plus the costs of closing. The sale cannot close unless each lienholder agrees to release its lien for less than the full balance owed.
Texas practice runs this through the TREC Short Sale Addendum, which makes the contract contingent on lienholder consent, sets a deadline for that consent, and allows the buyer to terminate and receive the earnest money if consent does not arrive in time. Lienholder review commonly takes far longer than an ordinary contract timeline.
A lien release is not automatically a debt release. Unless the lienholder agrees in writing to waive it, the unpaid balance can survive as a deficiency, and forgiven debt can carry tax consequences the seller should take to a tax professional.
Source basis
Definition checked against the official sources below on .
On the exam
Worked example
Worked example
A seller owes $260,000 and the best offer is $235,000. The contract closes only if the lienholder accepts the short payoff under the TREC Short Sale Addendum.
Exam trap
Tested in
Financing & Settlement (7 of 80 National)
From definition to recall
See this term inside a real exam question.
Pass Texas gives you Texas-specific practice, diagnostics across the 14 exam areas, Trap Library, Math Coach, offline access, and one $59.99 purchase. No subscription. No copied exam questions.
Try 5 free questionsThis definition is Texas real estate exam-prep education, not legal, tax, or professional advice. Verify current rules against the official source before relying on them for a real transaction. Back to the full glossary.