What you need:

• Amount of mortgage must exceed market value of the home.  (Otherwise you could sell the home at market value and pay off your entire debt.
• You need a valid hardship
  
  • Lost job
  • Divorce or death of a money making spouse
  • Serious illness
  • Serous change in mortgage terms: (balloon payment has kicked in).
• You must prove that your expenses are greater than your income: (inability to pay).
• Your liabilities exceed your assets (inability to sell something).
• No second trust deed unless you get the second trust deed holder to agree.
• Is the mortgage carried by the former owner?  He will be less able to facilitate your short sale than a bank but he will be more open to creative solutions: lower monthly payments over a longer period of time.

What to do:

• Set up a meetings with lenders to disclose total financial picture.
• Put house on the market as a short sale with the caution: "Short sale: must be approved by lender."
  • If Lender is insured, he will choose foreclosure over short sale.
  • On the other hand, the short sale is faster and easier for the lender.
    • Property management costs money
    • Eviction costs money
    • Repairs cost money
• Make sure everybody is kept in the loop, especially foreclosure departments which sometimes foreclose by mistake.