A short sale is, simply put, a way for homeowners to sell their properties for less than what they owe.  Most of the time, banks will release the balance owed without any further obligations to the owner, particularly when the home is a primary residence.  Genuine hardships help, too.  Owners who are recently divorced, have lost their jobs, taken a pay cut, or have gotten sick and are unable to continue paying their mortgages are prime candidates for a short sale.
For a short sale to work, the bank that owns the note (the instrument that binds the seller to repay the mortgage) has to agree to take less than what they’re owed. In many cases, this can be hundreds of thousands of dollars less than the original amount.

There are a lot of really, really good reasons not to let the bank simply foreclose on your property; to name a few, short sales have significantly less impact on your credit score, you can often avoid a deficiency judgment with a short sale, and short sales don’t jeapordize any security clearance you may have.

This video describes a lender’s right to a “deficiency judgment” when a property is sold in a short sale or foreclosed upon. In the state of Florida, lenders have the right to pursue a deficiency judgment against a borrower after they’ve foreclosed on the home; in other words, letting the bank have your home doesn’t necessarily release you from your financial obligations. People who have deficiency judgments leveled against them may see garnishment of wages, the inability to sell other properties without paying off the judgment, and possibly even levy your bank account.
We’re able to get banks to waive their right to a deficiency judgment in exchange for a short sale in a majority of cases (but not all). This right is never given up in a foreclosure.

This video describes what mortgage modification is, and how it can be a great option to avoid foreclosure as long as you can truly afford a “modified” or reduced payment.

If you owe more on your home than it’s worth – a common scenario in today’s market – then you’re ‘upside down’ on your mortgage. This is a big problem for a lot of sellers because it means they can’t sell their home without bringing money to the closing table.
In a short sale, sellers sell their ‘upside down’ homes for what it’s worth at today’s prices. The lender absorbs the cost of the real estate commissions, the unpaid balance on the mortgage, and the closing costs in exchange for not having to go through the lengthy (and expensive) foreclosure process.

While not necessarily associated with a short sale or foreclosure, homeowners with a genuine financial hardship often file for bankruptcy.  If you as a homeowner are thinking about declaring bankruptcy, it’s best that you speak with a legal representative to help you go over your options.