Short sales or short selling can happen when you are in default or near default with your mortgage payment. And you want to help get out from under without just letting the foreclosure take its course.

You can help your credit somewhat by a short sale. And sometimes you can help it a lot.

Plus, you can avoid personal liablity that you may have, depending upon your state. Remember that with second mortgages you may have personal liability in virtually all states in the US.

A mortgage short sale is a process where you sell your property at a lower price than the regular market place. The lender accepts the short payoff and releases their security interest, or mortgage, on your property.

That doesn't mean they release you forever from liablity. But it does let the sale to a buyer go through.

The short sales process can be complicated, but you can make your lender agree with your short sale as long as you're on the up and up and assuming you don't have significant liquid assets or paid-for properties that your lender will want to get to.

A short sale works, if your lender sees it as a better alternrative than a very expensive and tedious foreclosure proceeding.

Your lenders hate foreclosure proceedings. Not only will they spend more money during the foreclosure process, but they'll also get your old property. When they have old property, they'll be hard pressed to sell it again and will face additional losses.

So you're basically doing your lender a favor by asking for a short sale because you'll shoulder the responsibility of looking for a buyer.

Realize that you will not earn any money from short sales. Earning money or getting your equity is not the purpose of a short sale.  The main reason for short sales is to get out from under your debt, avoid foreclosure and to sell your house as fast as possible to avoid more financial losses.

And no, I'm sorry to say, you are not allowed to sell to a friend or family member with the intent on buying it back cheap later on. The lenders don't agree with this.