Accredited Financial Counselor (AFC) Practice Exam

The term that accurately describes the difference between the amount owed on a loan and the amount that a lender collects during a short sale is known as the deficiency amount. In the context of a short sale, this deficiency represents the outstanding balance that the borrower still owes after the property is sold for less than the mortgage balance.

When a property is sold through a short sale, the lender agrees to accept less than the total amount due on the mortgage, usually because the homeowner can no longer afford the payments and the property's market value has decreased. The short sale allows the borrower to avoid foreclosure, but the remaining debt that was not satisfied through the sale becomes the deficiency amount.

This concept is important for both borrowers and lenders, as it can have significant implications on the borrower’s credit and potential liability for unpaid debt. Understanding deficiency amounts is also crucial in financial counseling, as clients facing a short sale should be made aware of any remaining obligations they might carry after the sale.