Lance Falow of The Heathcote Group discusses short sales as an option for lenders

A short sale can be less costly to a lender than a foreclosure and a short sale is reportedly less damaging to a home owner's credit score as well. Short sales are less costly to the lender because occupied homes sell for more and are less likely to sustain damage from vandalism.

A short sale lets a home owner sell their home for less than is owed on the property; because of current reduced values on real estate most homes are not worth what home owners paid for them originally. Home owners should be aware that a short sale for their home may leave them with a portion of the debt even after their house has been sold, however.

"Short sales can be extremely difficult to complete due to the prolific use of second mortgages over the housing boom years," said Lance Falow of The Heathcote Group.

Many home owners financed expensive upgrades to their homes based on the equity that they had which now are lacking due to falling home prices. These second mortgages can make the short sale process very complicated. About a third of the homes in foreclosure across the country currently have a second mortgage on them.