A short sale occurs when a home owner owes more than the house is worth and the home owner is coming to the point of forecloser.
The home owner then goes to the bank and says “I know that I owe you $300,000, but I can’t sell it for that. I have an offer of $240,000, will you take the money and call it good?”
Of course, the homeowner will walk away with nothing, and its up to the bank if they are willing to take the loss or not. Often the will get an appraisal to see how much the house really is worth.
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