Example:  the mortgage balance is $450,000 but recent comparable sales prices of similar nearby homes are only $422,000. If the mortgage lender agrees to a $422,000 short sale, the buyer can purchase for $28,000 less than the existing mortgage balance.

Defaulting borrowers on a short sale walks away with nothing. The borrower offsets his/her mortgage obligation without a foreclosure on his/her credit history. Keep in mind that the lender will send the borrower an IRS-1099 form showing $28,000 of a taxable debtforgiveness income.