When the seller owes more money on the loan (and any other liens on the property) than the sale of the property will likely produce on the market and is unable or unwilling to bring money to closing, this is called a Short Sale. In a short sale, the lender has not yet foreclosed on the property so the owner still has an opportunity to sell the home and at least partially satisfy the amount owed to the lender.
There are several reasons why a short sale is preferred over a foreclosure. The impact on the neighborhood and surrounding community is not as severe as a foreclosure. The damage to the owner's credit is lessened by a short sale compared to a foreclosure. Not every owner can be saved from foreclosure, but looking into a short sale is worth the time and effort. It is highly recommended - if you find yourself in this situation - to seek advice from qualified finance, tax and legal professionals.
Certified in SHORT SALES & FORECLOSURE by the National Association of REALTORS®, contact me to discuss the options you might have available and help you maneuver the complexities of listing and selling your home as a short sale property.