So many people are looking for the next great bargain in real estate, but they may be looking in the wrong place.  A short sale happens when the owner of a home is has to sell it (for many reasons, not necessarily that they can't make the payments), but they owe more to the bank than the house will sell for on the open market.  We are in a buyer's market right now and the fair market value of a house is determined by what the buyer will pay.  Typically, the seller owes more than the value of the house because they have 100% financing on a house they bought within the last 2 years or they just recently re-financed for as close to the full market value as they could.  The bank has to decide to eat the difference in what the house will sell for and what is owned to them.  Banks don't like to lose money and if the property is in good condition they will agree to sell it at full market value and lose a few dollars, but it is still at market value.  The better value is the home owned by a seller who put down 20% or more on their loan and now have to sell for reasons beyond their control (job transfer, illness, divorce etc.) These sellers have even more flexibility than banks!  The fair market value of homes has not dropped by even 3% yet.  Banks are not going to lose any more than that, but homeowners with 20% or more to play with are willing to negotiate that 20% in order to sell a house that they have to leave.  So don't overlook the house that is on the market that is not listed as a short sale. It really might be the best bargain after all.