A "short pay" or "short sale" is when a lender accepts less than the total amount they are owed as full and final settlement of all obligations.   In addition, short sales almost always result in no "deficiency judgment" against you.   If a foreclosure sale is completed and a house sells for less than the mortgage balance, the seller can be liable for any "deficiency".   In addition, one of the benefits of a short sale is that it eliminates ongoing late payments on your credit report which accumulate during a lengthy foreclosure proceeding.  

Other key points regarding short sales are:

• Generally, a lender accepting less than the amount owing on their loan balance will not permit the seller to receive any cash proceeds
• Lenders are not obligated to accept a short sale.  
• Many homeowners hire Realtors® listed on this site because they have negotiated "short pays" in the past. The short pay off process is a timely one and is very unlikely to take less than 30 days.   For example, lenders generally require the following information before agreeing to entertain a short sale, including:
  1. A comparative market analysis
  2. A listing agreement from a Real Estate Office so they are convinced the home will be marketed aggressively.   Note that lenders often prefer to work with real estate agents, not investors, because they believe investors want to "steal" the property while licensed real estate agents have an obligation to represent your interests and market the property to a wide number of potential buyers.
  3. A title Report and a lien search
  4. A hardship letter from you explaining how you got behind on your mortgage.
  5. A preliminary settlement statement showing how estimated sales proceeds are calculated.