Short Sale
A sale in which the anticipated proceeds will not satisfy the secured debt, so every lienholder must approve the closing.
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.
On the exam
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 (6% of the exam)
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- Foreclosure
The process by which a lender forces the sale of property after default. Texas usually uses non-judicial foreclosure under a deed of trust.
- Non-Judicial Foreclosure
Foreclosure conducted by the trustee under a deed of trust's power of sale, without a court action, on the first Tuesday of the month in Texas.
- Deficiency Judgment
A court judgment against a borrower for the loan balance still owed after a foreclosure sale brings less than the debt.
- Lien
A monetary claim against property that secures payment of a debt. It can be voluntary, like a mortgage, or involuntary, like a tax or judgment lien.
- Release of Lien (Satisfaction)
The document a lender records when a loan is fully paid, releasing the deed-of-trust lien from the property.
Sources
This 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.