A short sale is when a lender accepts less than what you owe on your mortgage to avoid foreclosure, auction or bankruptcy. When a seller experience job loss, divorce, health issues or an ARM that is resetting higher; short sales come about. Short Sale is a workout option that is used when the homeowner no longer can meet their monthly mortgage obligation. Why would a mortgage company accept a Short Sale? A Short Sale saves the mortgage company the cost associated with the foreclosure process such as attorney's fees, eviction process, delays from borrower bankruptcy, damage to the property, cost associated with resale, etc. The mortgage companies do NOT approve all short sales. The homeowner has to prove there are no assets or financial resources available to pay the mortgage. Your Realtor must have extensive knowledge base in the complex realm of lender's policy.
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