What is a short sale?
Answers for Sellers

A short sale is when a lender or mortgage company approves a lower sales price than what is owed on the existing loan. This usually happens when there is real estate market down turn. Due to loss of equity the seller or home owner does not have funds or sales proceeds to complete the sale or is financial insolvent due to a financial hardship or other personal reason.  The lender or mortgage company then may offer a sale in compromise or short sale in order to avoid foreclosure.

Why would the bank be willing to loose money in order to allow the owner to sell his property? you may ask. Banks are not in the business to hold and own real estate properties. They are in the business to make interest in the money they lend. Often times is more cost effective for the bank to complete a short sale than to go through the whole legal process of a foreclosure.  see, additional short sale taxable concequences.