short sale

What exactly is a short sale?

Howdy Dynomac:

A short sale is when the owner is typically in default and wants to sell the property and owes the bank more than the fair market value and the bank is willing to discount the payoff to help sell the property usually before a foreclosure or bankruptcy occurs.

Question: Is the seller still going to payoff what they owe on the residence to the bank? If so, what would be the motivation to do a short sale? Obviously I am new to this.

Howdy Dell Investor:

The bank gets paid off but less than the amount owed. There is motivation on both the bank and the seller. Debt relief for the seller and the bank turns a non-performing loan into cash. The bank also does not have to deal with a foreclosure and could actually net less than with a short sale.