Attorney

• Consult with your attorney. While a lender may agree to a short sale, the lender might issue a deficiency judgment against you after the close of escrow, holding you responsible for the difference between the loan balance and sale price. Depending on your state, there may be state laws protecting you from a deficiency judgment. Review your state laws and loan contract with your attorney to decide if a short sale is right for you.
  
  

Accountant

• If the lender does agree to forgive the unpaid balance of the loan after a short sale, the Internal Revenue Service may see that forgiven amount as income, making you liable for income tax. Consult with your accountant to determine if the tax exemptions under the Mortgage Debt Relief Act of 2007 apply to your situation should the lender agree to forgive the unpaid balance of your loan.
  
  

Avoid Scams

• Avoid fraudulent schemes preying on distressed property owners. These companies may promise to stop foreclosure, ask you for an upfront fee, request you execute a power of attorney or ask you to transfer title to the property. Instead of working with a third party, work directly with your lender. Legal advice should come from your attorney, not your real estate agent.
  
  

Lender

• Contact your lender to negotiate a short sale, and work with your attorney. If the lender agrees to release the unpaid amount after the short sale, obtain the lender's promise in writing. Expect to prove to the lender that property values have dropped and you now owe more on the property than its current market value, and that you can no longer continue meeting the loan obligation. Each lender has its own procedures and policies handling a short sale. Your lender may require you obtain an appraisal, broker's price opinion or comparative market analysis to determine the current value of your property.
  
  

Process

• While real estate laws, practices and lender's procedures on short sales vary, short sale transactions share similar characteristics. Your lender will typically require you hire a licensed real estate agent to list the property. Select one experienced with short sales. The listing process is similar to a traditional listing, yet after you accept an offer from a buyer, the offer goes to the lender to accept, reject or counter. Lenders may require additional paperwork for the actual sales transaction.
  
  

Multiple Lenders

• If you have more than one lender, such as a second mortgage, contact all the lenders. You will need cooperation from all lenders on the property. It is more challenging to complete a short sale when more than one lender is involved.