According to the National Association of Realtors about one in every 10 home sales are short sales.  About 16 million homeowners own more than their homes are worth and would have to seek a short sale if they were forced to sell their homes now. A short sale happens when a lender allows a borrower to sell the home for less than what is owed on the mortgage.  The lender usually forgives the difference and considers the debt repaid. If the borrower defalts and the bank has to foreclose, there are costs to auction the property and maintain it while it's vacant.  Foreclosed homes also typically sell for much less than short sales.  A short sale will blemish a borrower's credit report but not as bad as a foreclosure.  The short sale process is complicated and very time consuming, some taking more than a year to finish.  Desperate sellers or inexperienced real estate agents often send in the wrong paper work, only to get kicked back.  Lenders do not have enough staff to handle the amount of incoming short-sale applications.  It can take months before a lender will get back to a seller about an offer from a potential buyer.