If you are a buyer looking for a bargain or a seller with financial woes, the term "short sale" may need some explaining.
The Realtor and the seller, after a thorough analysis of the market, agree on a list price. Usually the agreed upon price is less than the amount of the mortgage but the owner is in danger of default and the lender does not want this property if the owner defaults. When a buyer offers to buy this property at a price lower than the mortgage and the seller accepts this offer, the lender then is a party to the contract and must agree to a payoff that is less than the amount due on the mortgage. In this way, the seller protects his/her credit and the lender will write off the loss as an alternative to having a house to sell.
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