Some Short sale myths. Sellers are often confused and misinformed during the short sale process.

In a short sale transaction, the Seller owes more than he can sell the property for. For whatever reason, the seller does not have enough money to break even on the transaction - whether it is a decline in property value, loss of income or his finances just fall short of the costs of selling the property.

When a real estate broker is hired to put the property on the market, the broker signs a listing agreement with the seller. The seller is still the seller, and the responsible party to the transaction. The seller did not sign away the property or ownership rights to the lender. The seller still has legal responsibilities to perform on the contract when the buyer purchases the property.

The lender's role in this transaction is only to approve the "short" amount. Hence, "short sale" approval. The property is NOT handed off to the lender like most sellers think. The seller is still the legal owner of the property.

When a short sale is approved, the seller may have additional tasks to fulfill in the contract. All these depend on how the contract was accepted by the Seller. The seller signs legal documents to transfer title to the new buyer. The bank does not. The seller still shows up at closing the bank does not. 

The seller may be required to bring some funds to the closing, sign a promissory note in favor of the lender for the "short" amount or the seller may just walk away. The outcome depends on the negotiations of the "short sale" between the lender and the seller.