The fundamentals behind a short sale are pretty easy. For example, let's say that you have a property that is worth about $150k and just for fun let's say that it has two mortgages. The first mortgage is $100k and the second one is a mere $40k. So, the entire sum of the real estate property would be $140,000. Now, if you are a real estate investor, you obviously would not want to buy a $150,000 home for $140,000 it really just doesn't make any sense at all and is NOT in your best interest. The short sale is incorporated when you try and get the bank you are dealing with to less than the "debt" on the home, say $100,000 instead of $140,000. Why would a bank do such a thing? Well, there are several reasons behind this!

First off, there are, as always, going to be a lot of money paid out for the foreclosure and the various costs for repairs around the house. Second off, you have to consider wage growth. This means taking a look at something and realizing that the price of it will fluctuate over time. Think of something as simple as a carton of eggs. A few years ago you could buy a dozen for $0.50. Now you are looking at close to $2 for a dozen. The reason? People make more, it costs more to live, etc. The cost of living is always on the rise and real estate is no different. Banks look at this fluctuation and know that in the end it will benefit them. The one reason a lot of people don't like to do short sales is because they think it doesn't really benefit the owner of the home.  However there are many advantages of doing a short sale.  Your credit will only be affected for 2 years vs the 10 years that a foreclosure stays on your credit report.  In addition homeowners are now recieveing $3,000 to help with moving expenses, not to mention they are not evicted, no one is showing up harrassing them to get out.  A short sale is treated as a regular sale and the homeowner stays in the home until the close of escrow allowing them to save money during the short sale approval process. And in only two years you can buy another home instead of renting for 10.