how distress sales work
mortgage borrowers who can no longer meet the payments for their mortgaged property may opt to sell their property to pay off the mortgage examples of situations where distress sales occur include divorce foreclosures and relocations a short sale by a homeowner can be considered a distressed sale here the homeowner is attempting to sell their property even though its current market value is below the amount owed to their lender this can occur if the homeowner is forced to move from the home and cannot wait for the property s market value to recover the homeowner may have a new job that requires immediate relocation for example a divorce could force a home to be sold in order to liquidate assets that must be divided between the parties a lender typically must agree to a short sale before it can proceed because such a transaction would remove the collateral that secured the mortgage if a distress sale is conducted for a piece of property such as an antique or collectible art the seller might choose to take offers that are lower than the value of the item the seller might request offers by advertising the item or instead might offer the item to a pawnbroker 