By definition, a short sale occurs when a mortgaged property is listed for sale and the lender agrees to accept a mortgage payoff from the seller of less than than the amount that is actually owed.

This can occur when, for example, a property has dropped in value to such an extent that there is 'negative equity'. In other words, the market value of the property is considerably less than the amount owing on it. One option for the seller is to simply walk away from the property and allow it to go into 'foreclosure'. However, when this happens, the property owner often strips the property bare, taking out appliances, electrical fittings and even the door furniture. An empty shell is left which can quickly fall into disrepair and the bank/lender is left with a property which is difficult to sell. This does not benefit either the property owner or the lender. Once the owner has vacated the property, the lender, by default, becomes responsible for maintaining the property. if this is not done, the deterioration is a downward spiral which will continue to reduce the property's value and saleability, so nobody wins.

It is therefore in the best interests of both the lender and the owner to agree to 'short-sale' the property.

That all makes perfect sense, but what are the drawbacks?

The biggest single one is that negotiating with a lender  for a short-sale is very time consuming. Sometimes it can take months of negotiation and sometimes it can be several months before a lender will even respond at all to an offer. If there are two lenders involved, e.g., where there is a second mortgage, then the problem is more complicated still.

This article on the Florida Association of Realtors website on 11th August 2009;