Over the last several years a lot of people have bought homes, intending to live in them for many years, then something happened - maybe good, maybe bad, but regardless of the circumstances - they may find themselves in need to sell.

Because of easy financing, rampant speculation, flipping and sometimes plain fraud, home values skyrocketed most everywhere in recent years. Now, with the current market correction and downturn in home values, there may not be enough money in the property to pay off the outstanding mortgage balance and all closing costs.

In today's real estate market environment, we are seeing homes for sale that are clasified as pre-foreclosure, bank owned (or REOs), distressed properties and short sales. Well, a short sale is a property that may be in danger of foreclosure if the seller defaults on their loan payments. In a short sale property, the seller's proceeds will not cover the outstanding leans and/or loan obligations. Hence, the proceeds are short.

In a short sale transaction, the lender agrees to accept a mortgage payoff that doesn't cover the outstanding loan balance.

So why does the lender agrees to accept a short sale? Lenders almost always lose money when they foreclose on a property. There are a number of costs incurred when the property is foreclosed; Lawyers fees, court fees, processing fees, etc. In many cases the lender will lose less money through a short sale than they would by foreclosing on the property and selling it as a bank-owned property. In any case the lender loses money, it is just a matter of minimizing their loses.

If you are a seller and you need to sell you property and think that the current value is not high enough to cover your outstanding morgage balance, then you need to contact your Realtor and/or your mortgage advisor.

Buyers, sometimes think that they can get a great deal by buying short sale properties - not always. There are some benefits though about buying short sale properties if you are willing to do your part.