Why consider a Short Sale?
Short Sales do allow a closing to occur and, therefore, a commission to be paid. A Short Sale also allows the seller to sell the property upon its own terms, subject to the lender's consent, and possibly includes forgiveness of the deficiency amount.
The effect of a Short Sale on a seller's credit report is much less damaging than a foreclosure, deed in lieu of foreclosure, or bankruptcy, since the negative entry on the credit report shows up as a pre-foreclosure and redemption matter, rather than a deed in lieu of foreclosure, or a foreclosure itself.
The lenders do not wish to pursue a foreclosure or seek a deed in lieu of foreclosure because they do not want the property back, which would be the result of such a foreclosure or deed in lieu. They do not want the property back because they incur considerable costs in marshalling, restoring, maintaining, re-marketing, and selling the property. The lender is more apt, in this day and age, to work with a seller in a Short Sale or other workout situation, as it is better for the lender.
In addition to a Short Sale having a less negative impact on a seller's credit rating, a seller who participates in a Short Sale can quickly sell a piece of property and cut its cash outflows and liability and/or invest in other properties in a quicker manner than they could in the aftermath of a foreclosure.
The listing broker is also helping a seller who has financial problems as well as earning a commission. Buyers benefit because they can typically purchase a piece of property for less than fair market value and contract directly with the seller subject to the lender's approval, which means the buyer has some control of the property. If the property went through a foreclosure, a buyer would just typically be one of the bidders on the foreclosure steps or would have to wait a lengthy period of time while the foreclosure proceeded and negotiate with the lender's Realtor, and, meanwhile, the property would be falling into further disrepair.
