Banks lose a great deal of money in a foreclosure. As a result, when a loan is delinquent or in default, the borrower or his representative can often approach the lender and request a "short sale."

The lender will then allow the borrower to sell the house for less than the outstanding loan amount. The bank takes the proceeds -- less encumbrances, real estate selling costs, and, in some cases, other loans -- and forgives any remaining overage.

Because of the number of interested parties involved and the legal and tax ramifications, it is important that the borrower have a certified representative to negotiate with all involved.