Whether you've become aware of the distressed situation on a property through an agent, a FSBO ad or word-of-mouth, this is not a do-it-yourself project. A short sale is one real estate deal where you really need to get help from an experienced agent or attorney. Not all real estate agents know how to handle a short sale, so make sure you consult with one who can demonstrate special training or a good track record with short sales.

Why lenders (might) agree

It might seem counterintuitive for a lender to go along with a short sale. After all, a lender is legally entitled to pursue the full balance of the loan. When a homeowner falls behind on payments, the lender can (and often does) hold the borrower responsible for every penny owed.

And yet more and more lenders are willing to consider approving a short sale. In a January survey of senior loan officers conducted by the Federal Reserve Board, more than 65 percent of those surveyed said they anticipate short sales or deed-in-lieu of foreclosures to be significant loss-mitigation steps for 2008.

Lenders are painfully aware of just how bad the current foreclosure crisis is. They know the cold reality is that a large number of struggling borrowers will end up losing their homes and often see the advisability in accepting the inevitable and trying to minimize their losses. Yet, some lenders seem to remain in denial. "Some of them are being tougher right now than they have a right to be," says Richard Geller, of MortgageReliefFormula.com. "I wonder if they expect a big bailout somehow. I expect lenders to get a lot more desperate later in 2008."

Foreclosure is an expensive and time-consuming process for a lender. By agreeing to a short sale, the lender wraps up this little mess quickly, and perhaps with less of a loss than it would have incurred with a foreclosure.

Remember, after foreclosing, the lender owns the home and has to maintain it, insure it and pay taxes on it. So instead of receiving payments each month, the lender is now forking out money every month. Plus, short sales help the lender look good on paper -- the property never gets listed as an actual foreclosure, which helps the lender's numbers. They see it as the lesser of two evils -- if the numbers make sense for them.