A short sale is when your mortgage lender(s) and/or lien-holder(s) agree to discount the loan, accepting less giving you an opportunity to sell your home at current market value. If your home is over-leveraged, underwater, or you are behind on payments and cannot sell your property for what is owed, then you may be eligible for a short sale.
Lenders created short sales as a foreclosure alternative because they actually incur a smaller financial loss. By accepting less than what is owed on your property allows them to get their non-performing loans off their books. Your lender(s) are not in the business of owning real estate and would rather short sale your house then to foreclose on your property. Once a property is foreclosed upon the bank still has to go through the efforts of selling the property.
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