A short sale is different from a foreclosure, which is when the seller's lender has taken title of the home and is selling it directly. Homeowners often try to accomplish a short sale in order to avoid foreclosure. But a short sale holds many potential pitfalls for buyers. Know the risks before you pursue a short-sale purchase.

Unless you are absolutely certain you know all the debts secured by the property, do a title search to find out how what needs to be paid to close the sale i.e. find out how many liens there are and how much each one is.  A lien is something that is attached to the property that must be dealt with when you transfer the title. Normally, you pay the debt and the lien is released. The type of lien you may be familiar with is a deed of trust that secures the payment on a mortgage loan. If there is a lawsuit that results in a judgment against the property owner, it can be recorded in the county where the property is located, and the judgment becomes a lien against the property. If people who do work on the property are not paid, they can file a mechanic's lien. If the homeowners association is not paid, they have the ability to file a lien under the terms of the declaration of covenants, conditions and restrictions that cover the neighborhood. The taxing authorities can file a lien if the property taxes, state income taxes or other assessments are not paid. Similarly, if the Internal Revenue Service is not paid, they can file a lien.

It's a good idea to have a title search professional perform a title search for you on a short-sale property to see all the liens attached to the property. If there are multiple lien holders (e.g., second or third mortgage or lines of credit, real estate tax lien, mechanic's lien, homeowners association lien, etc.), it's much tougher to get that short sale contract to the closing table. Any of the lien holders could put a kink in the process even after you've waited for months for lender approval.