When a homeowner has to sell, has defaulted on the payments, and the proceeds from the sale are going to be less than the mortgage amount, then the bank needs to approve of a 'short sale'.

A short sale usually occurs when the owner cannot make the mortgage payments and has little or no equity in the home. The bank might approve of the short sale because the foreclosure process can cost a lost of time and money for the lender, and the lender may reason that it is better to just cut the losses and move on. The lender would get the proceeds from the sale, and the owner would be forgiven the rest of the debt owed. This will not work if the owner can clearly make the payments, owns other real estate with lots of equity, or lied on the loan application. It is not an easy way out of a bad investment.

From a buyer's standpoint, these homes can be purchased at current market values and result in savings to the buyer. Buyers need to be market ready, mortgage approved and ready to close.