Short Sale and Foreclosure Glossary: Plain-English Definitions
Every term your lender, attorney, or real estate agent might throw at you during a Maricopa short sale, defined the way a homeowner would actually want to hear it.
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James Sanson | Real Broker | Licensed in Arizona
This glossary defines the most common short sale, pre-foreclosure, and foreclosure terms that Maricopa, AZ, homeowners encounter in plain English with Arizona-specific context where it matters. Definitions are factual and informational. They are not legal, tax, or financial advice. For decisions affecting your specific situation, consult appropriate professionals: an Arizona-licensed attorney for legal questions, a CPA for tax questions, a HUD-approved housing counselor for general guidance, and a licensed real estate agent experienced in short sales for sale-related decisions. Call 520-838-8037 to talk through your specific situation with the James Sanson Team.
Short sales, pre-foreclosure, and foreclosure use specialized terminology that can be confusing when you encounter it for the first time. This glossary is organized alphabetically and covers approximately 50 terms that come up regularly in short-sale work in Maricopa, AZ. Each definition aims for plain English and adds Arizona-specific context where it matters (e.g., anti-deficiency statute analysis, trustee sale procedures, military family protections, and similar). The James Sanson Team has been working on Maricopa short sales since 2004, and the goal of this page is to make the vocabulary itself less intimidating.
For procedural depth on any topic, follow the silo links: the Maricopa short sale process covers procedure, pre-foreclosure options for Maricopa homeowners covers timing and alternatives, selling a home when you owe more than it's worth covers when a short sale becomes necessary, loan-specific short sale guidance covers FHA, VA, USDA, conventional, and second-mortgage scenarios, and short sale help by neighborhood covers Maricopa-specific subdivision context. Call 520-838-8037 to talk through your specific situation.
Jump to term
A Acceleration clause·Anti-deficiency statute (Arizona-specific)·Appraisal·Approval letter
C Cancellation of debt income (CODI)·Cash for keys·Comparative Market Analysis (CMA)
D Deed in lieu of foreclosure·Default·Deficiency·Deficiency judgment
E Escrow
F FHA Pre-Foreclosure Sale (PFS)·Forbearance·Foreclosure·Forgiven debt / 1099-C
H HAFA (Home Affordable Foreclosure Alternatives)·Hardship·Hardship letter·HELOC (Home Equity Line of Credit)·HOA lien·HUD (U.S. Department of Housing and Urban Development)
L Lien·Lis pendens·Listing agreement·Loan investor·Loan modification·LTV (Loan-to-Value ratio)
M Mortgage Forgiveness Debt Relief Act
N Negative equity·Notice of Trustee Sale
S SCRA / MSRRA·Second mortgage·Senior lien·Servicer·Short payoff·Short sale·Strategic default·Subordination
U Underwater mortgage·USDA short sale
A
Acceleration clause
A provision in most mortgages allows the lender to demand the entire remaining loan balance be paid immediately if the borrower defaults. Acceleration typically follows a Notice of Default and is part of the foreclosure process in Arizona.
Anti-deficiency statute (Arizona-specific)
Under Arizona law, as of publication, two statutes govern when a lender may pursue a deficiency after foreclosure on residential property: A.R.S. §33-729 (judicial foreclosures) and A.R.S. §33-814 (trustee sales). For qualifying residential property of 2.5 acres or less used as a single one-family or single two-family dwelling, no deficiency judgment may be maintained after a non-judicial trustee's sale; the sale price is treated as full satisfaction of the debt. When a deficiency action is allowed, lenders generally have 90 days after the trustee's sale to file. Loans originated after December 31, 2014, may have additional carve-outs (for example, construction loans on homes built for sale, or dwellings never completed or never used as a residence). Anti-deficiency analysis is fact-specific and requires consultation with an Arizona-licensed attorney for your specific situation.
Appraisal
A formal valuation of the property is performed by a licensed appraiser, typically ordered by the lender to determine fair market value. In a short sale, the appraisal helps the lender decide whether the proposed sale price is acceptable. Different from a Broker Price Opinion (BPO), which is a less formal valuation by a real estate agent.
Approval letter
The written document from the lender (or all lenders, in multi-lien situations) confirming acceptance of the short sale terms, including sale price, seller proceeds (typically zero), and treatment of any remaining deficiency. The approval letter is the goal of the short sale negotiation; without it, the closing cannot proceed.
B
BPO (Broker Price Opinion)
An informal property valuation conducted by a licensed real estate broker or agent, typically ordered by the lender during a short sale review. The BPO involves an interior or exterior inspection plus a comparable sales analysis. BPOs are faster and less expensive than full appraisals, which is why lenders often use them during short sale negotiations.
C
Cancellation of debt income (CODI)
Forgiven mortgage debt may be treated as taxable income by the IRS, reported on Form 1099-C. Several exclusions exist (insolvency, bankruptcy, and, for debt discharged before 2026 or under a written agreement made before 2026, qualified principal residence indebtedness). Tax treatment is fact-specific and requires consultation with a CPA or tax professional.
Cash for keys
An arrangement in which the lender pays the borrower a sum (often a few thousand dollars) to vacate the property in clean condition and turn over the keys, typically after foreclosure or in lieu of one. Cash for keys is occasionally offered as part of a short sale or deed in lieu of foreclosure when the lender wants the property vacated quickly without damage.
Comparative Market Analysis (CMA)
A property valuation prepared by a real estate agent using recent comparable sales, active listings, and market data for the specific neighborhood. In a short sale, the seller's agent typically prepares a CMA to support the proposed listing price and to provide to the lender's valuator as supporting documentation.
D
Deed in lieu of foreclosure
A voluntary transfer of the property title from the borrower to the lender, used as an alternative to formal foreclosure. The borrower hands over ownership, and the written agreement states whether the lender forgives the remaining debt or accepts the property in full satisfaction of the loan. Not all lenders accept deeds in lieu, and the credit impact can be similar to foreclosure, depending on how the lender reports the event.
Default
The state of being behind on mortgage payments (typically 30 days or more) such that the loan is no longer current. Default starts the timeline that can lead to foreclosure if not resolved. Pre-foreclosure begins when the lender records a Notice of Trustee Sale or files a foreclosure action.
Deficiency
The difference between the unpaid mortgage balance and the proceeds from a short sale or foreclosure. For example, if a home sells short for $300,000 against a $350,000 loan balance, the deficiency is $50,000. Under Arizona law, as of publication, in foreclosure situations, the deficiency is calculated as the total debt minus the greater of the sale price or the fair market value on the date of sale. Whether the lender can pursue the borrower for the deficiency depends on the loan type, state law, and the terms of the short sale agreement. See also: anti-deficiency statute.
Deficiency judgment
A court order requiring the borrower to pay the deficiency after a foreclosure or short sale. In Arizona, A.R.S. §33-729 (judicial foreclosures) and A.R.S. §33-814 (trustee sales) limit deficiency judgments on qualifying residential properties of 2.5 acres or less used as single-family or two-family dwellings, with the specifics depending on the foreclosure type and the loan's origination date. Anti-deficiency analysis is fact-specific and requires consultation with an Arizona-licensed attorney.
E
Escrow
A neutral third party (typically a title company in Arizona) that holds funds, documents, and instructions during a real estate transaction and disburses them according to the agreement. In a short sale, escrow holds the buyer's earnest money, manages the closing process, and disburses proceeds per the lender's approval letter.
F
FHA Pre-Foreclosure Sale (PFS)
The short sale program for FHA-insured loans is administered by HUD. Under HUD's PFS guidelines, the program is designed to allow owners in default to sell at fair market value, with HUD paying the lender the difference between net sale proceeds and the indebtedness, subject to defined criteria. The program has eligibility requirements (delinquency status, owner-occupancy or limited investor categories, arm's-length sale), minimum net-proceeds thresholds tied to appraised value, and defined marketing windows. The program is designed to allow borrowers who qualify and complete the program to avoid a deficiency judgment, with the exact outcome determined by HUD rules and the specific approval. See the Loan Types silo for FHA-specific details.
Forbearance
A temporary agreement between the borrower and lender to reduce or suspend mortgage payments for a specific period, with the unpaid amount typically added to the loan balance or repaid through a plan after the forbearance ends. Forbearance is a temporary measure, not a permanent solution; the deferred payments must eventually be addressed.
Foreclosure
The legal process by which a lender takes ownership of a property due to the borrower's default on the mortgage. In Arizona, the most common type of foreclosure is the non-judicial trustee sale, which typically takes around 90 days from the Notice of Trustee Sale to the actual sale date. Judicial foreclosures are also possible but less common.
Forgiven debt / 1099-C
When a lender forgives a portion of a debt (such as the deficiency in a short sale), the forgiven amount may be reported on IRS Form 1099-C and treated as taxable income. Several exclusions exist (insolvency, bankruptcy, and, for debt discharged before 2026 or under a written agreement made before 2026, qualified principal residence indebtedness). Consult a CPA for your specific situation.
H
HAFA (Home Affordable Foreclosure Alternatives)
A federal program from 2009 to 2016 that provided standardized short sale and deed-in-lieu procedures, with seller relocation assistance. HAFA has expired, though some lenders continue to offer similar programs informally. The general short-sale framework HAFA used (lender review, BPO, approval, closing) remains standard in most short sales today.
Hardship
A documented financial or personal circumstance that makes continuing to pay the mortgage no longer feasible. Common hardships include job loss, income reduction, divorce, the death of a co-borrower, medical expenses, military relocation, or a significant decline in property value. Hardship documentation is required by most lenders to approve a short sale.
Hardship letter
A written statement from the borrower explaining the circumstances that led to the inability to maintain mortgage payments. The hardship letter is typically required as part of a short sale package and should be honest, specific, and supported by documentation (paystubs, medical bills, divorce decrees, termination letters, etc.).
HELOC (Home Equity Line of Credit)
A revolving credit line secured by a second lien on the property. In a short sale with a HELOC, the HELOC lender (the junior lien holder) must agree to the sale terms separately from the first mortgage lender. HELOC short sale negotiations often involve a separate settlement payment to the HELOC lender.
HOA lien
A lien recorded by a homeowners association against a property for unpaid HOA dues, assessments, or fines. In Arizona, HOA liens are typically junior to first mortgages but must be addressed at closing. HOA arrears can complicate a short sale by adding another negotiated party and another payoff line on the settlement statement.
HUD (U.S. Department of Housing and Urban Development)
The federal department that oversees FHA loans and many housing programs. HUD-approved housing counselors provide free guidance to borrowers facing financial hardship. For FHA loan short sales, HUD's rules and procedures govern the FHA Pre-Foreclosure Sale program.
J
Junior lien
Any lien on the property that is recorded after the first mortgage (which is the senior lien). Junior liens commonly include second mortgages, HELOCs, HOA liens, mechanic's liens, and judgment liens. In a short sale, junior lien holders must agree to the sale terms separately from the senior lien holder, often with a partial settlement.
L
Lien
A legal claim against a property that secures a debt or obligation. The first mortgage is typically the senior lien; other liens (junior liens) can include second mortgages, HELOCs, HOA liens, tax liens, and judgment liens. All liens must be addressed at closing for a clear title to transfer to the buyer.
Lis pendens
A formal notice filed with the county recorder indicating that litigation is pending related to the property's title. In Arizona, lis pendens may be filed in judicial foreclosure proceedings (less common than non-judicial trustee sales). The recording of a lis pendens warns potential buyers that title issues may be in dispute.
Listing agreement
The written contract between the seller and the listing broker authorizes the broker to market and sell the property. In a short sale, the listing agreement should include short-sale-specific disclosures and provisions, including acknowledgment that lender approval is required for any sale to close.
Loan investor
The actual owner of the mortgage (often Fannie Mae, Freddie Mac, a private investor pool, or sometimes the originating lender itself). The investor's guidelines, not the servicer's, typically determine which short-sale terms are acceptable. The servicer collects payments and processes the short sale on behalf of the investor.
Loan modification
A change to the existing mortgage terms (such as interest rate, loan term, or principal balance) negotiated between the borrower and lender, typically to make payments more affordable. Loan modifications are an alternative to a short sale and may be preferable when the borrower wants to keep the home and has sufficient income to support modified payments.
LTV (Loan-to-Value ratio)
The ratio of the loan balance to the property value, expressed as a percentage. For example, a $300,000 loan on a $250,000 home has an LTV of 120%, meaning the borrower is underwater. LTV is a key factor in determining whether a short sale is necessary.
M
Mortgage Forgiveness Debt Relief Act
Federal tax law let homeowners exclude forgiven mortgage debt on a qualified principal residence from taxable income. The exclusion began with the Mortgage Forgiveness Debt Relief Act of 2007 and was extended several times (IRC §108(a)(1)(E)). As of publication, it applies to debt discharged before January 1, 2026, or discharged later under a written agreement made before that date. Other exclusions, such as insolvency or bankruptcy, may still apply. Confirm current federal law and your situation with a CPA.
N
Negative equity
The condition of owing more on the mortgage than the property is currently worth. Negative equity is also called being 'underwater' or 'upside down' on the mortgage. Negative equity makes a traditional sale impossible without bringing money to closing, which is why short sales exist.
Notice of Trustee Sale
The formal notice recorded by the lender in Arizona to initiate a non-judicial foreclosure (trustee sale). The notice specifies the date, time, and location of the trustee sale, which typically occurs 90 days after the notice is recorded. The recording of the Notice of Trustee Sale starts the official pre-foreclosure period.
P
Pre-foreclosure
The period after the borrower has defaulted on the mortgage and the foreclosure process has begun (typically marked by the recording of the Notice of Trustee Sale in Arizona), but before the foreclosure sale has occurred. Pre-foreclosure is the time window during which a short sale, loan modification, or other alternative can be pursued.
R
Reinstatement
Bringing a defaulted mortgage current by paying all past-due amounts, late fees, and legal costs. In Arizona, the borrower typically has the right to reinstate the loan up until shortly before the trustee sale. Reinstatement requires paying the full arrears amount in a lump sum and is an alternative to a short sale when the borrower can come up with the cash.
S
SCRA / MSRRA
The Servicemembers Civil Relief Act (SCRA) and Military Spouse Residency Relief Act (MSRRA) provide protections for active-duty military service members and their spouses, including interest rate caps, foreclosure protections, and residency provisions. For military families considering short sales, SCRA protections should be evaluated with the lender or a JAG legal assistance attorney.
Second mortgage
A mortgage loan secured by a second lien on the property, ranking junior to the first mortgage. Second mortgages can be traditional second loans (typically used for purchase financing, home improvements, or debt consolidation) or HELOCs. In a short sale, the second-mortgage holder must separately agree to the sale terms.
Senior lien
The lien that has the highest priority among multiple liens on a property is typically the first mortgage. The senior lienholder is paid first from any sale proceeds. In a short sale, the senior lien holder is usually the primary negotiating party because they have the most to lose if the loan defaults.
Servicer
The company that collects mortgage payments, manages escrow accounts, and handles customer service on behalf of the loan investor. The servicer is the borrower's primary point of contact and processes short sale applications, but the servicer's guidelines must align with the investor's rules for any short sale to be approved.
Short payoff
An alternative term sometimes used for a short sale, referring to the lender accepting less than the full loan balance as payoff. Short payoff and short sale describe the same transaction, with 'short payoff' emphasizing the lender's perspective.
Short sale
The sale of a property for less than the unpaid mortgage balance, where the lender agrees to accept the reduced amount as full or partial satisfaction of the loan. Short sales typically occur when the borrower can no longer afford the mortgage, and the home's value is less than the outstanding loan balance. See the Short Sale Process silo for full procedural details.
Strategic default
When a borrower stops making mortgage payments, it is not because they cannot pay, but because they have decided the home is not worth the remaining loan balance. Strategic default carries credit consequences and potential tax implications, and the interaction with Arizona's anti-deficiency statutes (A.R.S. §33-729 and A.R.S. §33-814) is fact-specific depending on the property type, loan type, and date of loan origination. Strategic default decisions should involve consultation with an Arizona-licensed attorney and a CPA.
Subordination
An agreement in which a senior lienholder agrees to accept a position behind a new loan, allowing the new loan to take priority. Subordination occasionally comes up in refinancing scenarios. Not typically relevant in standard short sales, but can come up in workout situations.
T
Title company
A company that handles title research, title insurance, escrow services, and closing in Arizona real estate transactions. Most Arizona closings, including short sales, take place at title companies that act as neutral third parties between buyer and seller.
Trustee sale
A non-judicial foreclosure auction conducted by the trustee named in the Deed of Trust securing the mortgage. In Arizona, trustee sales are the most common form of foreclosure and typically occur 90 days after the Notice of Trustee Sale is recorded. The property is sold to the highest bidder, who is often the foreclosing lender itself.
U
Underwater mortgage
A mortgage where the loan balance exceeds the current property value. Same as 'negative equity' or being 'upside down' on the mortgage. See the Underwater Mortgage silo for guidance on options.
USDA short sale
The short sale process for USDA-backed Rural Development loans (Section 502 federally-backed and Section 502 Direct programs). USDA has specific guidelines for short sale approvals that differ from FHA or VA programs. See the Loan Types silo for USDA-specific details.
V
VA Compromise Sale
The VA's term for a short sale on a VA-backed loan. The VA must approve the compromise sale terms, and the servicer reviews them too. An approved VA Compromise Sale can release the borrower from the deficiency; the approval states the terms, and VA entitlement may be affected. See the Loan Types silo for VA-specific details.
Other resources
If your specific situation involves terms or scenarios not covered in this glossary, call 520-838-8037, and we can walk through the specifics. Some related Maricopa-specific resources you may also find useful:
- Step-by-step short sale procedure for procedural coverage
- Maricopa pre-foreclosure alternatives for timing-sensitive decisions
- Negative equity sale options for the underlying financial situation
- Short sale guidance by loan type for FHA, VA, USDA, conventional, and second-mortgage specifics
- Short sale help by Maricopa neighborhood for subdivision-specific dynamics
- Our short sale track record and credentials for the background of the team
For general non-Maricopa resources: HUD-approved housing counselors are listed at the HUD counselor directory and provide free consultation; the Arizona Department of Real Estate (ADRE) regulates Arizona real estate licensees and can be contacted for licensing verification; the Consumer Financial Protection Bureau (CFPB) publishes general guidance for borrowers facing financial hardship. For a broader real estate context in Maricopa, our companion site, MaricopaHomesForSale.com, covers the full local market.
Important.The definitions on this page are factual and informational. They are not legal, tax, or financial advice. For legal questions about Arizona anti-deficiency statutes, foreclosure procedures, or your specific liens, consult an Arizona-licensed attorney. For tax questions about forgiven debt, 1099-C reporting, or cancellation of debt income, consult a CPA. For general guidance on options, consult a HUD-approved housing counselor at the HUD counselor directory. For short sale execution, call 520-838-8037 to consult with the James Sanson Team. No specific outcome can be promised in any short sale situation; each case is fact-specific.
For your specific situation, call 520-838-8037 to speak with Maricopa short sale specialists who have over two decades of local experience.
Frequently asked questions
What is the difference between a short sale and a short payoff?
What is the difference between a BPO and an appraisal?
What is the difference between the servicer and the loan investor?
What is a Notice of Trustee Sale in Arizona?
What does it mean to be underwater on a mortgage?
What is Arizona's anti-deficiency statute?
What is a 1099-C and why does it matter for short sales?
What is the difference between foreclosure and a deed in lieu of foreclosure?
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