I must be getting old. I remember 2 cases in the last decade where the seller was upside down – and showed up WITH CASH to the closing.
In one case it was a recent purchase (less than 2 years, and the market was flat/declining. The seller had to cover the realtor commissions – so he brought cash. In the other, my coworker had lived there 15 years, but the market had declined and he was tired of owning a boat anchor (his term)… so he was willing to bring money to the table to get out of the house. This latter one – purchased for $120k, sold for 75k (west of Philly) He’d refi’d once so he owed $90k. After the commissions/transfer taxes/etc he brought a significant chunk of change to the table, relative to the house price.

I guess that’s so “last century” now.

I don’t think it’s fair to assume all underwater sales are destined to be short sales – but the buyer should absolutely be warned if it is going to be a short sale.