WHAT IS A SHORT SALE

Short Sale - Let me start out by saying what a short sale is not. A short sale is not a foreclosure.  According to one Real Estate Investing club, a... "Short Sale - ... is A sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes"

This is a great jumping off point.  I would add a short sale is the sale of any property including commercial property where the lender or lenders as a form of settlement will allow the sale of a property where the outstanding loans are more than the proceeds they would receive at closing.  The lender may or may not forgive the amount over the sales proceeds.  If a lender does not forgive the difference a deficiency may be sought by the lender.  

So, in short, a Short Sale is the sale of a property where the mortgage is shorted to allow the sale of said property and the monies owed on the existing mortgage minus the sale proceeds are either forgiven or not. 

So what are the lenders options in a short sale? Lenders either do not approve a short sale or if they approve a short sale they issue a 1099c, a promissory note or pursue a deficiency.