A SHORT SALE is a real estate sale that occurs when an outstanding loan balance (which may inlcude more  than one loan) and is secured by real estate is greater than the current market value of the property.  The property is sold at market value, (sometimes less) and the lender agrees to take a discounted pay off, most often forgiving the balance due on the loan(s). For example: If a property has a loan balcance of $500,000 but is sold for $450,000, a negotiation with bank(s) usually accomplish the bank accepting the $450,000 as it's pay off for the loan.  Note that it is absolutely critical that you work with experienced professionals to accomplish this.  The benefit to the owner of the property is avoiding foreclosure. A foreclosure on ones credit will take up to 8 years to go away. A short sale does only very minor damage to credit enabling the seller to rebuild credit and life quickly.  In some cases this also helps the home owner to avoid bankruptcy.  It is a win win situation for all involved.  The seller is out of a difficult situation and the bank has gotten most of its money back. 

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