Many homeowners have spent years building up equity in their homes, only to watch it vanish as a result of the housing crisis. The housing market has been saturated with underpriced homes due to foreclosures, and finding buyers for many of these properties can be very difficult.
The wave of foreclosures has been damaging to the economy on a number of levels. Property values drop in neighborhoods occupied by multiple foreclosed houses. Once vibrant areas must now manage blight as it creeps into neighborhoods filled with empty, bank-owned houses [source: All About Real Estate Short Sales].
Short sales can help resuscitate a neighborhood by making it easier for buyers to get into homes at affordable prices. By giving buyers and sellers an option that avoids the nuances of a foreclosure sale, short sales can reduce the number of excess homes for sale in a neighborhood, in turn reducing the number of unkempt, vacant houses [source: Foust].
Like sellers who wish to get out of unaffordable homes, prospective homebuyers benefit by not having to endure the red tape and bank auctions associated with the purchase of a foreclosed home. And since a short sale may be able to recoup a higher percentage of a home's value than a foreclosure auction could, short sales can keep overall home prices from falling to abnormally low levels [source: Dempsey].