Like many new things, the vocabulary involved in a particular new field or endeavor can be a barrier all on it's own.  To help you understand short sales, I've compiled this quick terminology list that might help you if you're considering buying or selling short.  It'll help you with THIS ARTICLE ON SHORT SALES, and many others.



  1. Underwater

     If you're underwater, it means that your mortgage is bigger than the market value of your home.  Some people use the term if the home is less worth than what they paid, but that's not correct.  If you put 20% down, your house may have fallen in value, but it has to fall over 20% before you are truly underwater, as far as a short-sale is concerned.
  2. Subject to a third party

     This is advertising language that most commonly means that someone other than the seller will have to agree to this transaction.  It's almost always a bank, and it is almost always because a sale will not generate enough money to pay the bank back in full.  It's used to protect the seller, and give notice that they are short funds at the list price.
  3. Short-Sale Approval

     This is the approval from a bank agreeing to what they are going to be paid back.  While it is often based on the purchase price of the home, it is separate.  There are some homes that have already negotiated short-sale approvals, and the seller's ability to sell is based on what you can pay at that number.
  4. Short-Sale Petition

     This is a seller's petition, to the bank, for the reasoning for their short-sale.  A job loss or other financial hardship is often required to show the bank that their chances of collecting on the loan in full are poor.
  5. Hardship Letter

     A short-sale often involves a hardship letter as part of the Short-Sale Petition.  
  6. Preliminary Net Sheet

    A document that shows what amounts are owed to who as part of the sale, and that describes what the bank can receive as net payment on the loan.  Helps them ballpark their loss.
  7. BPO

    : A BPO is short-hand for Broker Price Opinion.  The bank will often hire real estate agents to give an "opinion" of what the property in the short-sale is worth in today's market.  They may do one or many BPOs, 


    which are cheaper than appraisals.  Contrary to popular belief, the bank is just as interested (if not more interested) in getting market value for the house as most sellers.  If the BPO (or the appraisal) comes in higher than the purchase price, the bank may decline to do the short-sale unless the buyer pays more money!!
  8. Comparative Market Analysis (CMA)

    This is a reasoning that, in fact, the price the buyers are paying is top dollar in your market.  It is similar to an appraisal, but is often done by the seller's real estate agent.
  9. Equity

     Equity is how much is left over in value after the home is purchased and the loan (and other commitments) is paid.  Usually in a short-sale there is no equity.
  10. In Arrears

     This is number that states how far behind the sellers are in mortgage payments.  Arrears can be used for any payment that is behind (condo fees, taxes, etc), but is most commonly talked about with mortgage payments.  

Hope that clears up some lingo for you!