Being in California, I have had very little exposure to foreclosures - until the last few months. Now it seems like everyone I run into needs help selling the home that they owe too much on.
I remember the pyramid schemes of the 70s, if you were in first you got your money back. If you were a late adopter, you got the privelege of paying the early adopters. This translates over to real estate of these last few years as the stragglers finally jumped on the bandwagon just as it was going off the cliff.
So, in a short sale, the owner owes more than s/he can sell it for.
As the Realtor®, I get to market and sell the property as usual, then I get to negotiate with the overwhelmed bank for 2-4 weeks only to get a proposal back from the bank either accepting or rejecting the offer. And, oh by the way, the bank often thinks the realtor commissions are a profit center for them so, I get paid poorly or not at all.
Why would any business person deal with this kind of sale? Simple, I do it for my clients. As the buyer agent, we can negotiate some rockin deals. As the Selling agent, I have a client that is in trouble and I am much more skilled at negotiating a decent resolution that the client/owner.
