Step 1  Contact your mortgage lender. Don't just call or email customer service or the "loan work out" department. You need to speak with the Manager of the problem loan department or another individual who has the authority to approve a short sale request. While mortgage lenders can be sympathetic to these problems, they are never anxious to allow a short sale. If you're uncomfortable in this role, let your lawyer or advisor negotiate with your lender.

Step 2  Write a letter "authorizing" your mortgage lender to disclose your loan information to real estate agents, lawyers, title companies, or other interested parties. Your loan information is subject to privacy laws so your lender needs your written authorization to release this data to anyone. At a minimum, this letter should include the property address, your name, your loan number (or other identifying data), and, if appropriate, a list of the parties for whom you wish this information to be given.

Step 3  Compile some preliminary financial information (sometimes called a "Net Sheet") about your prospective short sale. Include the expected sales price and all costs that might be attached to the sale, including your current unpaid loan balance, payments due, real estate commissions, and loan or other fees expected to be payable. If you're unsure how to create this document, your real estate agent, lawyer or advisor should be able to produce it for you.

Step 4  Write a serious "hardship letter", detailing all the surrounding events that have occurred to cause you to arrive in this financial situation. Explain your economic problems honestly and directly ask your mortgage lender to accept a less than full balance payment. While the more dire your circumstances, the better the chance your request will be granted, you should resist the temptation to over dramatize your situation.

Step 5  Write up a statement of your current income and all of your other assets for your mortgage lender to evaluate. List your other assets, including bank accounts, stocks or other investments, additional real estate, and anything else of value. This information should display that you have neither the income nor the assets to repay your mortgage loan in full. You will often be asked to submit the last 3 to 6 months' bank statements, also. Your mortgage lender will examine these to learn if there are recent large cash withdrawals or high numbers of checks clearing your accounts. Lenders want some assurance that you haven't been hiding or diverting funds that might go to them.

Step 6  Compile a current market analysis of real estate sales in your area to emphasize the wisdom of your request for a short sale. This document should show the selling prices of similar homes in your area for the past 3 to 6 months. You should also include some similar properties currently for sale in your area. During times of market value declines, short sales become more "popular" and this comparative analysis again reinforces the need for you to request this consideration. If you're unsure how to create this analysis, your real estate agent can prepare this document for you.

Step 7  After you reach common ground with a potential buyer, deliver a copy of your proposed Purchase & Sale Agreement to your mortgage lender. They will want to examine the price, terms, and other conditions in the document. Don't be surprised if your lender attempts to renegotiate (downward, of course) some features, like real estate commissions or other financial considerations you've made. Assuming your lender accepts the agreement, you can then proceed to bring your short sale to fruition.

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