What is a "Short Sale"?? A "Short Sale" exists when a Lender, Bank, or Note Holder agrees to allow the Trustor (usually the home owner) to sell the home for less than what is owed. You may ask, why would anyone want to do this?  Why would a home owner or lender want to sell a home for less than what is owed.

There are many reasons, the primary one's are two fold. Banks in general do not exist or have a business plan to hold and own real estate, more particularly single family homes. They are too difficult to manage for institutional lenders. When a home owner is upside down in his home (owes more than the home is worth) and is unable to make the payments as scheduled in the recorded note the bank is forced to call the note due and or force a foreclosure sale (See Foreclosures).  

When the lender forecloses in a stagnent market it usually means he will get the home back (sold back to the beneficiary) at the Foreclosure Sale. They then have to secure the home, make necessary repairs, have utilities turned on, etc. Then they have to list the home as an REO or "Real Estate Owned" with a local real estate broker.  This all takes time, effort, and money, and it is usually the last resort for the lender.

The other way is for the lender to allow a "Short Sale" allowing the home owner to list the property and sell it for less than what is owed. This makes sense to the lender as he doesn't have to take the home back and spend thousands of dollars to repair and market the home.

It makes sense for the home owner because he/she is allowed to exit the home in a more normal transition.  And more importantly keeping their credit intact.

The key here is to work with an "Experienced Real Estate Broker" that knows how to structure a "Short Sale" with full lender approval. You must also check all applicable laws regarding the lenders ability to sue for a "Deficiency Judgement" the difference in what the home sold for and the amount of outstanding loan balance.  Laws very in each state so always speak with your attorney or seek competent legal advise on all real estate matters especially when your home is in foreclosure.

Important things to remember, short sales don't close on time. And unfortunately most short sales don't close at all so have alternative preparations for moving, storing furniture, etc.