A lot of people were caught unawares when they had their adjustable rate mortgage or ARM reset to a rate that they could not to pay. Those who were affected were caught in the financial setback which this resulted to and with the current economic instability and unemployment, there may just be a need to sell their homes at a worth that is less than its original one, or face foreclosure.
Those who have fears of having to file for bankruptcy or are making decisions which could still in the end save their credit rating, then the real estate short sale is one of those solutions. It may not be what you want for yourself, but if there are few or no other solutions in store, this is worth looking at.
A short sale happens when the other solutions to preventing foreclosure are no longer options. This is now the action of a homeowner in distress where they sell the property for less than the amount that is due. The new buyer is not a bank, it is a third party and all the proceeds which resulted from the sale will go to the lender.
The lender may do two things: one, they will forgive the value difference from the sale of the property with that of the original value or two, the lender will sue for the payment of all or part of the difference between the price of the sale and that of the original mortgage value. There are some states, however, where the lender is legally bound to forgive the difference when a homeowner sells on a short sale.
Again, before submitting yourself to a short sale, if you see that you have the potential of experiencing a financial setback, make moves and ask for loan modification from the lender before it is too late. The lender will assist you for they do not want to lose money in short sales or foreclosures.