The simple definition of a short sale is when the lender agrees to accept an amount lower then the amount owed to satisfy the loan. This is done in situations where the home cannot be sold at a price high enough to pay off the loan and there is no equity involved. Most commonly seen in today's market due to 100% financing interest only loans. Banks are not in the business of owning and selling homes. It can be very costly for them to acquire and maintain a foreclosed home, in addition foreclosed homes show poorly on their financial statements. A short sale can be a viable option for owners who find themselves in financial hardships due to loss of a job, divorce, etc... It is best to consult a CPA or attorney for the best legal advise as there have been some recent changes in the tax laws regarding the deficit amount called the Mortgage cancellation tax relief act H.R. 3648. If a short sale is the right move for a home owner, the next step is finding a qualified real estate broker to go over the forms and procedures as well as do a detailed CMA (comparative market analysis). It is very important for the mortgagor to stay in contact with the lender. Avoiding phone calls and letters will only speed up the foreclosure process. The initial consultation is free, private and confidential. If you do nothing else get the facts and understand your options.