The home seller avoids foreclosure and has an easier transition to move into affordable housing. The lender also takes a financial loss, but usually not as large of a loss when one forecloses on the property. Foreclosures are expensive and time-consuming, so by agreeing to a short sale, the lender is accepting the inevitable and trying to minimize losses. The lender also sees a short sale as looking good on paper, because the property never gets listed, unlike a foreclosure, and this helps the lender’s numbers. Some buyers have negotiated with the lender and helped minimize the damage to the seller’s credit score rating. The loan will appear as “paid” with the following notation of “settled for less than originally owed” which is far more favorable than foreclosure.
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