Short Sales 
This process can be daunting…  However, desperate times call for desperate measures.

• STEP 1: Verify the value of your property. Your broker will provide you with an estimate of market value.
• STEP 2: Estimate your closing costs. Ask your broker for a Seller Net Sheet.
• STEP 3: Determine the amount owed against the property. This will be the total of all loans against the property.
• STEP 4: Do the calculations. Subtract the total amount owing against the property from the estimated proceeds of the sale. On a short sale, this will be a negative number.
• STEP 5: Contact the lender or lenders. Talk to someone in the customer service department and tell them the situation. They may direct you to a specific department. Talk to a supervisor or manager if possible; this person will have more authority.
• STEP 6: Ask the lender what its procedures are for a short sale. Some lenders are willing to work with you by reducing the amount owed or making other arrangements. Other lenders will tell you that your debt is your responsibility, one way or the other.
• STEP 7: Sell the property.  

It may be necessary to enlist the help of an attorney
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Contacting the lender

• Call the Lender
  You want a supervisor's name, the name of the individual capable of making a decision.
• Submit Letter of Authorization
  If you are working with a real estate agent, you may need to write a letter to the lender giving the lender permission to talk with that specific agent about your loan. The letter should include the following:
• Property Address
• Loan Reference Number
• Your Name
• The Date
• Your Agent's Name & Contact Information

• Hardship Letter
  Draft a letter explaining the unfortunate situation you find yourself in.  Let the lenders know the sad truth about your financial position.
• Estimated Net Sheet
  An estimate showing the sales price you expect to receive as well as closing costs, unpaid loan balances, outstanding payments due and late fees, including real estate commissions. Your real estate broker should be able to prepare this for you.  If the bottom line shows cash to the seller, you will probably not need a short sale.
• Copies of Bank Statements
  Gather up bank statements, and be prepared to explain any recent, withdrawals.
• Proof of Income and Assets
  Lenders will need to know your current financial situation.  You will be required to provide information on any and all assets you may have.
• Comparative Market Analysis
  Your real estate agent can prepare a CMA for you, showing the sales amount of recently sold comparable properties.
• Purchase Agreement & Listing Agreement
  When you reach an agreement to sell with a prospective purchaser, the lender will want a copy of the offer, along with a copy of your listing agreement.

Now if everything goes well, the lender will approve your short sale. As part of the negotiation, you might ask that the lender not report adverse credit to the credit reporting agencies, but realize that the lender is under no obligation to accommodate this request.  ... Get the entire story here about.com

Tips & Warnings

• Closing costs will include title and escrow fees (if the seller is responsible for any portion of them, which will depend on your county), attorney fees, a portion of unpaid property taxes, re-conveyance fees, notary fees, delivery fees, documentary fees and/or transfer fees.
• Remember that the amount on your monthly loan statement does not include interest. Interest is accrued until the date a loan is paid off, so you may have as much as 30 days of interest on top of the balance owing, and you'll need to include this interest in the total payoff amount.
• If a property is sold under a short sale, the lender may require the buyer to make up the difference, either through a personal obligation or a collection.

It may be necessary to enlist the help of an attorney
Get the entire story here about.com