• A short sale is a process used when the value of real estate falls to a point less than the balance outstanding on the mortgage loan. A short sale involves two steps. First, the mortgage lender agrees to discount the loan, to lower the amount due on the loan to a point where it is more in line with the value of the real estate. Second, the owner places the property for sale at a more competitive price with the objective of using the purchase proceeds to pay off the outstanding mortgage loan. There are a number of benefits to a short sale.
  
  

Avoid Foreclosure

• A primary benefit of a short sale is that both the mortgage lender and the property owner are able to avoid foreclosure. The property owner does not end up with the financial losses associated with a foreclosure as well as the damage to her credit report. The mortgage lender avoids the time and expense of a foreclosure.
  
  

Avoid Bankruptcy

• In many instances, when a person "goes underwater" on real estate--when value dips below mortgage loan balance--his overall financial picture negatively is impacted. Bankruptcy oftentimes ends up being a necessity. Through a short sale, you can get rid of real estate that represents a negative element of your financial portfolio, staving off bankruptcy.
  
  

Reasonable Sales Price

• A short sale benefits the purchaser of real estate. The individual who buys property as part of a short sale is able to obtain a more favorable price on the real estate than otherwise is available in the absence of a discounting or reduction of the mortgage loan balance.