When a homeowner’s mortgage is more than the house is worth, the home is classified as “under water”. You cannot sell a home that is under water because the money generated from the home is not enough to pay off the mortgage. You cannot sell your home and give clear title to the new purchaser unless you can pay off the existing mortgage. A short sale is where, thru negotiation, the mortgage company agrees to take less money to satisfy the mortgage. For example, your home is worth $200,000 and the mortgage balance is $300,000. In a short sale, the mortgage company will agree to satisfy the mortgage in full for $200,000. If properly negotiated, the $100,000 difference is forgiven. In addition, the negotiation may include a few thousand dollars for the homeowner to cover moving expenses.