A short sale is when the homeowners lender agrees to accept a payoff for less than what is truly owed on the mortgage.  When trying to buy a home advertised as a short sale keep in mind that the bank who holds the mortgage must approve the deal.  Some of these transactions can become very drawn out as the banks are overwhelmed and are very hard to work with at this time. These deals are only allowed under certain circumstances.  If the deal is accepted then it will close just like any other transaction.  As a buyer you may be facing endless delays waiting for the bank to decide if they can or want to do the deal.

As a seller, once the bank accepts less, they can either forgive you of the balance or request that you pay some or all of it back over time. This should be negotiated by the seller and worked out the best way possible.