We, Realtors  used to see  some  rare transactions where the proceedings from a sale would not be enough to pay the sellers mortgage off ;   in those cases usually the seller would come up with the difference to complete the sale.  

With the huge downturn in housing   markets all over the Nation,  this scenario is happening very often  today  with  deficiencies  reaching  to  high amounts  of dollars, collapsing  financial systems . 

Especially the  property owners who bought houses   during peak years of  the  market  finding  themselves in  “negative equity”  situations, where  they can not afford to come up with the difference  if they have to sell today. Another expression  commonly used for this situation  is   “property under water”.

When a seller with negative equity has to sell  and can not come up with the difference,  then the   term  “Short Sale”  comes up.  The sellers lender is getting short , that is why it is called “Short Sale”  or sometimes  called “Pre-foreclosure Sale”  In fact completing a short sale might take up to 90+  days,  ironically long process  just the opposite short sale.

Even if the property title still belongs to the seller, the lender is taking the loss, so they get to approve  the  sale.  A seller must prove to his lender   that he has no other way out other than a short sale.  A short sale costs less  for a lender/bank than taking ownership of the property through legal procedure and trying to sell at an auction or by listing for a bank.   It is also a less damage to the sellers credit compare to be  foreclosed on.

It sure  sounds  a win-win solution from outside.

But, unfortunately short sales take a long time to complete. The waiting and uncertainty is not a pleasant experience for parties involved in.

But it seems to be one of the   better solutions in today’s market  and will stay for a while.

I am experienced with Short sale listings… I work hard and take them to closing.