In many cases, short sales present a proverbial “win-win” situation. Here’s how:
Sellers avoid foreclosure and protect their credit from the harder hit of foreclosure.
Buyers receive a good price on the home.
Lenders avoid a costly foreclosure. The potential loss from a foreclosure is typically higher than a loss from a short sale.

How it works
Say you owe $200,000 on your home and can no longer make the mortgage payments. One option is to refinance your home and secure a lower payment based on a longer term or better interest rates. But if your property has lost value due to local market conditions (say it would sell for only $150,000), refinancing isn’t feasible. If the bank agrees to a sale at $150,000, it’s called a short sale.

Although short sales have become more common in recent years, banks don’t always grant them. In general, they approve short sales in theses situations:

Seller has a hardship (such as divorce, bankruptcy, unemployment, job relocation).

Seller owes more on the mortgage than the home’s current market value.

Mortgage is in or near default status.

Seller has no assets.

However, different banks and lenders have different requirements. So sellers should discuss the short sale option with their lender.

Short sales can present a great deal for buyers. But the process is a bit more complicated than a normal home purchase, and it will take patience and help from an experienced agent.