In Real Estate, a short sale or “short pay” is simply defined as lender accepting less than the amount owed on a property as payment in full. A short sale occurs when a property is sold and the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured to the property upon receipt of less money than is actually owed.

A lender will loose money in a short sale or a foreclosure regardless.  In most cases, the lender would loose less money by allowing a short sale and that is the reason that a lender might accept a short sale.