A "Short Sale" is when a homeowner sells his home for less than what is still owed on the mortgage. Typically, a short sale occurs in a distressed-mortgage situation, which comes about when a homeowner finds it difficult to make the monthly mortgage payments. In most cases, a bad economy has decreased the value of the home, leaving the homeowner under water or owing more than the house is worth on the market. Often, mortgage lenders agree to a short sale to get the bad loan off their books. It can take anywhere from 30 to 120 days to settle on a short sale from the day an offer is accepted by the lender.
To most people, it sounds rather strange for any type of lender to be willing to accept a lower amount from homeowners than what they truly owe on their home. There is more than just one reason why a bank chooses to accept short sales. The key reason is, simply put, that a short sale costs them much less than what a home foreclosure would. The expense banks already have to consider from foreclosures is astronomical. They will also be able to supply you with information in regards to the benefits received from short sales. However, when they provide homeowners with the option of a short sale, they are then able to recover at least a partial amount of what they would otherwise completely end up losing.
In the end, if you are considering selling your home as a short sale or buying a home that is in short sale, you need patience since you will be dealing with, not just the seller of the property, but the lender as well. Before getting involved in a short sale, consult your lender and other financial and real estate experts.