Actually, this happens before the house is repossessed. After it's repossessed it's a foreclosure. A short sale is when the bank agrees to let the current owner sell the property for less than they owe on it, and not pay the remainder back to the bank. It's better for the homeowner than a foreclosure is, but it can be hard on a buyer. It often takes a long time, and the bank may go back and forth on the deal. Also the current owner may drag it out so that they don't have to pay on their mortgage. It can be a good deal for the seller, and it CAN be a good deal for the buyer if they aren't in a hurry and have a lot of patience.
at 6:47 PM on Oct. 5, 2010