Is a short sale an honest thing to do?

Usually banks require some level of financial hardship in order to forgive the balance on a mortgage.  It isn't enough that someone owes 200K and their home is worth 180k... borrowers who want a short sale have to show that they would lose their home to foreclosure due to an inability to pay their bills if the short sale were not processed.  At the point that a borrower is unable to make payments, it is in the interest of the bank to allow for a short sale.  The bank has one less foreclosure to process, and the home will likely sell for more in a short-sale than a foreclosure processed months later.

This past year I dealt with many homeowners who owed more on their homes than the current value.  In most cases, the sellers brought a check to the closing.  I'm sure many would have loved to do a short sale if it were an option, but it wasn't - they had the finances to keep their house if they needed, and they had the funds to pay the difference.