It is possible to use a short sale to avoid a foreclosure, but the ability to do so depends on the lender’s approval. Most lenders won’t give full approval without an offer from a potential buyer to buy the foreclosed home. The short sale process takes longer than other types of home sales and buyers often back out of the contract if they find a different home.
Here's how this process can work: Let's say you owe $100,000 on your mortgage. You know of someone else who wants the home, who will buy it for $75,000. The new buyer pays the lender $75,000. In this case, you still have to pay the difference between the short sale price and the balance of the mortgage owed – $25,000.