The answer depends on your point of view.
Seller/Borrower's point of view. The seller is the borrower under the existing loan. The reason the seller/borrower would want a short sale is because the seller MUST sell for some reason (i.e., job transfer, divorce, etc.). The problem (normally) is that the subject property is presently worth less than the amount that is currently owed on the property. Typically, this is the result of a decline in the real estate market. Consequently, the only way the seller/borrower can sell the property is if the lender agrees to allow transfer of the property (which is presently the collateral for the lender's loan) without receiving full payment of the current loan balance. By doing a short sale, the seller/borrower is able to transfer the property and avoid a foreclosure.
Lender's point of view. Lenders are in the business of making money. Sometimes that means making decisions that reduce the loss a lender will take on a particular transaction. If the lender agrees to a short sale, the subject property is sold to a buyer and the lender receives some amount of the current loan balance. The remaining loan balance may be written off by the lender, or the seller/borrower may agree to make separate payment arrangements for the remaining loan balance and/or to secure the remaining loan balance with other real or personal property. If the lender does not agree to a short sale, the seller/borrower may "walk away" from the property and/or the seller/borrower may stop making payments and lender may be forced to foreclose (i.e., either a judicial foreclosure or a trustee's sale) on the property. Foreclosure is time consuming and sometimes expensive. During the foreclosure process, the subject property may be neglected or damaged. When ultimately sold, the lender may end up with less than if lender had agreed to a short sale. In some situations, a lender can get a "deficiency judgment" against the seller/borrower. In Arizona, however, under certain circumstances (i.e., residential property, 2.5 acres or less), the lender may not be able to get a deficiency judgment.
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