If you own a home in Myrtle Beach or elsewhere on the Grand Strand, owe more on your mortgage than the home would likely sell for, and the payments have become hard to keep up with, you have probably heard the term "short sale." It sounds technical, but the idea is simple.

A short sale is when you sell your home for less than what you owe on your mortgage, and your lender agrees to accept that lower amount. The Consumer Financial Protection Bureau (CFPB) calls it a type of loss mitigation, which means an option a lender can use when a borrower is struggling to pay.

Below, I'll walk through how a short sale works in South Carolina, what it can mean for your taxes, your credit, and any remaining balance, and who to talk to first. My goal is to give you clear information so you can make a calm, informed decision.

Quick Answer

A short sale is the sale of your home for less than your mortgage balance, with your lender's approval. Your lender, and any other lender with a loan on the home, must approve the price and terms before you can close. It is one of several ways to avoid foreclosure, and it can affect your credit, your taxes, and whether you still owe part of the balance, so get those answers in writing and talk with a HUD-approved housing counselor, a real estate attorney, and a tax professional before you sign anything.

I've been licensed since 2006 and have worked on both the buyer and seller side of residential and commercial sales. As an investor, I've also bought, renovated, and sold homes myself, so I look at every sale from both the seller's and the buyer's side of the table.

What Does "Short Sale" Mean in Real Estate?

In a typical sale, the sale price covers your mortgage payoff and your seller closing costs, and whatever is left over comes to you as net proceeds.

In a short sale, the price falls "short" of what it takes to pay off the loan. Because the lender will receive less than it is owed, your mortgage servicer (the company you send your payments to) has to approve the sale first. Fannie Mae's Selling Guide defines a short sale as a sale "in lieu of a foreclosure resulting in a payoff of less than the total amount owed, which was pre-approved by the servicer." (Fannie Mae Selling Guide B3-5.3-07)

A few things work differently than in a typical sale:

• Your lender weighs in on the offer. Freddie Mac explains that in a short sale, your lender and any other lienholders (anyone else with a loan or claim secured by the home) negotiate on your behalf. (Freddie Mac)

• Every mortgage on the home has to sign off. If you have a second mortgage or another loan secured by the home, the CFPB says you'll also need approval from those servicers. (CFPB)

An Example Scenario

Here's a common scenario, using round numbers for illustration only. Imagine a seller who owes $300,000 on a mortgage, and recent comparable sales suggest the home would sell for around $270,000 before closing costs. A traditional sale at that price would not cover the payoff, so the seller would have to bring money to closing to finish the sale.

In a short sale, the seller asks the lender to accept the proceeds from that sale even though they are less than the amount owed. Whether the lender agrees, and whether it forgives the rest of the balance, depends on the lender's review and the written approval it issues.

How Does a Short Sale Work in South Carolina?

Every lender has its own requirements, but the CFPB and Freddie Mac describe the same general order of steps.

1. Contact your mortgage servicer. The CFPB says you'll need to request a loss mitigation application from your servicer, send in a complete application with supporting documents, and receive approval from your servicer and the owner of your loan. (CFPB)

2. Explain your hardship and gather documents. Freddie Mac says the process starts with a hardship letter explaining why you can't keep up with payments, along with financial records such as bank statements and copies of bills. (Freddie Mac)

3. Price the home based on today's market. A short sale price still has to make sense to buyers. For any listing, I start with research on recent comparable sales, the same approach behind a comparative market analysis, to give sellers a solid price range. If you want a starting point on your own, you can get a quick estimate at easyhomevaluenow.com.

4. Send offers to the lender for approval. When an offer comes in, it goes to your lender, and to any other lienholders, for review. Freddie Mac notes that this process may take some time, so plan for a longer timeline than a typical sale.

5. Close with an attorney. In South Carolina, the state Supreme Court has held that real estate and mortgage loan closings "should be conducted only under the supervision of attorneys." (Doe v. McMaster, S.C. Supreme Court, 2003) Before you sign the lender's short sale approval, it's wise to have a real estate attorney review what it says about any remaining balance.

Could I Still Owe Money After a Short Sale?

Possibly, and this is the most important question to answer before you agree to anything. The gap between what you owe and what the lender receives is often called a deficiency.

The CFPB advises that if you live in a state where you could be responsible for a deficiency, you should ask your lender to waive it before you go through with a short sale, and get that waiver in writing. (CFPB) Freddie Mac also notes that a seller may be required to repay the difference.

The answer depends on your loan documents and the terms of your lender's approval, so this is a question for a South Carolina real estate attorney.

How Does a Short Sale Affect My Taxes?

According to the IRS, when a debt is canceled or forgiven for less than the amount owed, the canceled amount is generally taxable, and the lender may send you a Form 1099-C showing the amount canceled. (IRS Topic 431, updated May 14, 2026)

Until recently, a special exclusion covered canceled mortgage debt on a main home. The IRS says that exclusion applies to debt discharged before January 1, 2026, and cannot be used for discharges completed or agreements entered into after December 31, 2025. (IRS Publication 4681, 2025)

Other exclusions may still apply, such as insolvency, which the IRS describes as your total debts being more than the fair market value of all your assets immediately before the debt was canceled. Tax rules can change, so talk with a tax professional about the rules for the year your sale would close.

How Does a Short Sale Affect My Credit and Buying Again?

Both the CFPB and Freddie Mac say a short sale can do less damage to your credit than a foreclosure, though it still has an effect.

It can also affect how soon you can get another mortgage. If your next mortgage is a conventional loan that follows Fannie Mae's guidelines, Fannie Mae's Selling Guide requires a four-year waiting period from the date the short sale was completed, or two years if extenuating circumstances can be documented. (Fannie Mae Selling Guide B3-5.3-07) Other loan types have their own rules, so ask a lender what applies to you.

If you have a VA loan: VA says that in a short sale, the servicer accepts the total proceeds from the sale as full payment of the debt, even if that amount is less than the balance. VA also cautions that this option could result in a loss or reduction of your future home loan benefit, and recommends calling a VA loan technician at 877-827-3702 before you decide. (VA News, August 13, 2026)

Is a Short Sale My Only Option?

No. The CFPB lists several options to review with your servicer, including refinancing, a loan modification (which changes the terms of your loan), forbearance (payments paused or reduced for a limited time), selling your home the traditional way, a short sale, and a deed in lieu of foreclosure (turning ownership of the home over to your servicer). (CFPB)

A HUD-approved housing counselor can help you sort through them, often at little or no cost, according to the CFPB's counselor search tool. SC Housing lists free HUD-approved counseling agencies across South Carolina, including in Myrtle Beach. (SC Housing) If you were hoping to apply for the SC Homeowner Rescue program, SC Housing says it is closed and will not be reopening. (SC Housing)

One caution: the Federal Trade Commission says it is illegal for a company to charge you upfront for promises to help with your mortgage, and that asking you to sign over your deed or telling you not to contact your lender are warning signs of a scam. (FTC)

How Long Does a Short Sale Take?

There isn't one standard timeline. A short sale adds a lender review step that a typical sale doesn't have, and Freddie Mac notes the process may take some time, so it helps to plan for a longer timeline from the start.

Will I Get Any Money From a Short Sale?

Usually not. Because the sale doesn't bring in enough to pay off the loan, Freddie Mac lists receiving no sale proceeds as one of the drawbacks of a short sale. (Freddie Mac)

Do I Need an Attorney for a Short Sale in South Carolina?

An attorney will be involved either way, since the South Carolina Supreme Court has held that real estate closings should be conducted only under an attorney's supervision. Separately, it's wise to have a real estate attorney review your lender's short sale approval, especially the language about any remaining balance, before you sign.

How Is a Short Sale Different From a Foreclosure?

In a short sale, you find the buyer and sell the home with your lender's approval. In a foreclosure, the CFPB explains, the lender takes action to satisfy the debt out of the sale of the property when the homeowner fails to make mortgage payments. (CFPB) The CFPB also notes that a short sale can do less damage to your credit than a foreclosure.

Final Thoughts

A short sale is a way to sell a home when the price won't cover what you owe, with your lender's approval. It can be one path to consider, but it comes with real questions about credit, taxes, and any remaining balance. The most important steps are getting good advice early and getting every agreement in writing.

If you're trying to figure out whether a short sale is even part of the conversation, it starts with two numbers: what you owe, and what your home would likely sell for today. If you'd like to look at both numbers together privately, book a Zoom call with me or call or text me at (843) 385-6630. I'm glad to walk you through them, with no pressure either way.

The information in this article is for general educational purposes and is not legal, tax, or financial advice. Market conditions change, so please confirm details with the appropriate professional before making decisions. Beach Properties Group, Keller Williams Innovate South, 601 21st Ave N, Myrtle Beach, SC 29577, (843) 443-9400. Each office is independently owned and operated. Equal Housing Opportunity.

Brian Staub is a real estate agent in Myrtle Beach, South Carolina helping homeowners sell with clarity and confidence.

Brian Staub
Beach Properties Group Keller Williams
601 21st Ave N, Myrtle Beach, SC 29577
(843) 385-6630
[email protected]
https://beachpropertiesgroup.com/