The short sale is quickly becoming the norm for real estate transactions.  Unfortunately, that doesn’t mean that there are standardized forms and procedures.  Every lender has its own set of standards, forms, and guidelines. However, one can expect the seller of a short sale and the sellers’ listing agent to provide: tax form T4506, hardship letter, listing agreement, sales agreement, 2 years tax returns, 2 months most recent pay checks, a copy of a utility bill, two months most recent bank accounts, an account of assets and liabilities, a monthly budget, arms length transaction statement and a  Dodd-Frank form.  This will get you started.
The selling agent must also be prepared to provide more detailed information about their buyers than usual. For example: social security numbers, pre-qual letter, and proof of funds, current address, and an arms length transaction statement that is specific to the seller’s lender.
Once all this data is collected and submitted to  the first mortgage holder and the second mortgage holder then negotiation begins.
The first usually offers to pay the second a nominal amount. The second either accepts, or rejects and perhaps counters. Sounds simple but it may take weeks to come to an agreement….or not.
Only 3 of 5 short sales actually are successful at this time. (Is the glass half empty or half full?)  Its best to prepare for the worst case. Your seller should be packing for a move one way or the other.
If a short sale lender  is using a 3rd party transaction site like Equator.com then the process might be a little easier. Agents have many complaints about the system, but its probably the best that is available.  Bank of America,  Chase and Nationstar all use Equator with more lenders expected to join in the future.
You can expect to take about 60-90 days on average for the short sale process. That’s about twice as long as a regular non short sale.
Sellers shouldn’t accept offers that are too far below the current market as the lenders that hold the mortgages do order evaluations and will reject short sales that are significantly below the market.  Many investors are making multiple offers with the expectation of being rejected and are very happy when an offer they didn’t expect to be successful is accepted. Most of the time the offer is not accepted and the seller has lost valuable time on an unrealistic offer.
Buyers and sellers should realize that today’s real estate professionals are working twice as hard for half as much under much less than ideal situations. 
Patience is the key.  If your a seller, always consult with an attorney and a professional tax consultant. The Realtor does not have the expertise to answer legal or tax questions.
(Rick Dillion serves Solano, Napa and Contra Costa counties.)
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