Short Payoff Calculator

Short sale = sell property for less than loan balance with lender consent. This calculator sizes the forgiven debt and tax exposure.

Loan balance

Short sale price

Selling costs %

Borrower marginal tax rate

Forgiven debt (COD)

$96,600

Lender net proceeds

$353,400

Deficiency amount

$96,600

COD tax exposure

$23,184

How the math works

Short payoff: balance − (sale price − selling costs) = deficiency. Lender waives deficiency in exchange for accepting the short sale.

Always obtain a written release of deficiency. Without it, lender may pursue you post-sale. State law varies — get local counsel before signing anything.

How to Use

Enter loan balance.
Enter agreed short sale price.
Enter selling costs.
Read lender proceeds and debt forgiven.

Frequently Asked Questions

How is this different from DIL?

Short sale: property sold to third party at discount, lender accepts proceeds. DIL: deed transferred directly to lender. Short sale involves market sale process; DIL is a direct transfer.

Will lender approve?

Typically if (1) borrower shows hardship, (2) property is worth less than loan, (3) lender's net from short sale > net from foreclosure. Be patient — approvals take 45-120 days.

Deficiency judgment?

Depends on state law and lender. Some states (CA on first-mortgage purchase loans) bar deficiency. Others allow it unless waived in short sale agreement. Always negotiate written waiver before closing.

When does a lender negotiate vs foreclose?

Lenders calculate their net recovery from foreclosure (asset value minus legal, time, and sale costs) and compare to any workout proposal. If your offer nets the lender more than foreclosure, and you present it with clear sources of capital, most lenders will engage. Bring a credible sponsor, documented sources, and a timeline — vague asks get declined. Build the relationship before distress, not after.