A Short Sale is when the lender of record agrees to discount their payoff to accommodate a sale of a house when:
1) The borrower has experienced hardship and is unable to repay the mortgage
2) The value is proven to be less than the amount needed to pay off all loans, encumbrances and real estate selling costs
3) The loan is delinquent or in default.
Often when a house in which the proceeds of a sale will fall short of what the home owner still owes on the mortgage, lenders will accept the lesser proceeds as a short sale. By doing this the lender forgives the balance of mortgage and thereby avoids a lengthy and costly foreclosure procedure.