While not every piece of real estate that comes on the market as a short sale represents an unfortunate loss of a home, certainly the overwhelming majority of them do.  The Short Sale process is just a stone's throw distance from foreclosure.  It's generally a difficult, emotionally, not to mention financially, stressful position for any homeowner to be in.

While a short sale represents an opportunity to potentially avoid foreclosure and the impact on one's credit that comes with, it's not without it's own risks.  As of this writing, the ultimate impact of short sales on credit is still largely up for debate.  No seller should enter into that process without first discussing it with their attorney, tax adviser, etc.

If, in fact, you do make the decision to put your home up for sale as a short, the following information is intended to help you improve your odds at avoiding delays that might inevitably cost you an opportunity for success. One thing is very important to remember:  Your lender will likely not even discuss the possibility of approving a short sale until you've secured an actual contract on your home.  Any contract you get should include a clause stipulating that your contract is subject to your lender (or lenders) approval.

Here are the beginnings of your "To Do" list.  These are most likely the things your lender(s) will require should you secure a contract on your.

• Contact your lender(s) and find out exactly who you should speak with about a potential short sale.  Get any names and phone numbers you can.
  
• Contact the persons whose names you were given and tell them you are planning to short sell your home.  Ask them for a list of the information/documents they will require from you if you are successful
  
• It doesn't hurt to just ask if they would approve a short sale (they likely won't tell you if they would, but you might as well ask anyway.
  

While the list of items that are part of a short sale package vary from lender to lender (and no doubt are evolving as more and more contracts are being submitted, the following items are among those you will likely need to provide: 

TIP - Make sure your Loan Number, Name, and the Property Address are on every single page of every single document you provide the bank.  These packages can wind up being over 100 pages long...and the lender is dealing with hundreds, even thousands of these files.  A missing page can delay or derail the process.  Protect yourself by having this information on every piece of paper you send them!

• Hardship letter - This is a letter that YOU write that basically describes your situation.  They want to know what is necessitating the sale of your home, and why you are unable to bring whatever shortfall there is to closing.  Did you lose your job?  Medical crisis?  Loss of household income?  Interest rate jump?  Filing bankruptcy?  Give them details!
  
• Authorization to discuss your file - In addition to you, who will you want to be able to discuss your file with your lender(s)?  This could be a family member, your attorney, your Realtor, etc. Your attorney or Realtor will have forms for this purpose if you need them, but whatever you use, be sure it includes your name, your property's address, and your loan number on it.  It will also need to include the name and relationship to you of each person you want to be able to discuss your file.  The bank will not discuss your file with anyone without this authorization
• Your Monthly Budget - How do you spend your money each month?  They want a list of everything you bring in and everything you spend on a monthly basis
• Employment information - This would include copies of pay stubs for the past several months, employment agreements, etc.
• Bank Statements - They want to see what has gone into and out of your accounts (banking, savings, cds, etc.) for a certain period of time...perhaps a year or so
• Tax Returns - They'll likely ask for the last 2 years
• CMA (Comparative Market Analysis) on your home - Your Realtor can provide this for you.  This would include recent sales of similar homes, review of current competition, assessment of factors influencing the marketability of your home (things like high unemployment in the area, overbuilding of new construction, excessive competition of distressed properties, etc., are examples of the types of information your bank will find helpful in making a decision.
  
• Marketing History of your home - How long has it been offered for sale?  What kind of response have you gotten?  What about price changes, incentives to buyers, etc.? 
  
• Offer History - Is this current offer the only one you've received?  They'll want to know what happened in negotiations on any and all offers you've had.
• Copy of your Listing Agreement - Your Realtor will be able to provide you a copy
• Copy of MLS printout - They'll want to see what agents see when they look up your listing in the local MLS.
• Copy of Sales Contract - This should include all riders, disclosures, addendum, etc.  Be sure your contract includes the condition that your agreement is subject to your lender's approval.
• Copy of your buyer's Earnest Money Check
• Copy of your buyer's Pre-Approval letter (or verification of assets if the buyer is paying cash)
• Estimated HUD1 - Your attorney or Realtor will assist with this.  It's a document that appears at every real estate closing showing where all the funds were distributed at closing.  This is an estimate that should provide an estimated payoff amount for all lien-holders.

While this list may not be complete and your particular lender might perhaps not ask for all of the above, or might ask for some other documentation, this list should at least give you an idea of what to expect.  The more complete the package you give them right from day one of your effort to  encourage their approval, the less likely you will be to incur delays.

And those delays are not your friend.  It's not at all uncommon for this process to take several weeks, even several months, before you find out whether or not your lender will approve your short sale contract.  And while you're waiting for their response, it's also not uncommon for buyers to simply walk away, becoming frustrated and impatient at the process.  This is why it is critical, right from the start, to be sure the buyer understands that this may well be a very lengthy process and there is no guarantee as to the outcome.