A short sale is a transaction where the current lender of a property agrees to take less than what is owed on that property. At the conclusion of the deal, the former owner/seller sells the property and makes nothing and the bank ends up with less that it originally loaned. The bank "writes off" the loss and the seller may get hit with the loss at tax time (remember that the seller was forgiven a debt which can be considered income). Short sale are complicated and often takes months to conclude because frankly the bank isn't crazy about losing tens or hundreds of thousands of dollars. Therefor the bank requires a lot of evidence before it will agree to the deal. Nonetheless, for the VERY patient buyer a short sale can be a very good deal.