9. Negotiate 

It's not uncommon for the lender to reject your offer or to come back with a counteroffer. As with any real estate transaction, you should figure out beforehand what your absolute highest limit is, and don't be afraid to walk away if the lender won't meet your figure.

10. Seal the deal 

Once you've reached an agreement that all three parties -- you, the seller and the lender -- are OK with, get everything in writing and officially recorded. Make sure the seller understands all of the terms of the deal. Next comes the closing and the property is yours.

More important details

1. The entire process gets far more complicated and uncertain of success if there is more than one lender involved. Second or junior lenders often are the ones absorbing most of the loss. If there is a second mortgage or a home equity line of credit, you'll need approval from all. In addition, you may find your mortgage loan was sold to another entity in a process called "securitization," and therefore you also need approval from that company.
   
   Be sure to do a title search, and verify the lien position of the lender you plan to contact. Only pursue short sales with the primary lien holder. Making a deal with a junior lien holder is a waste of time, as you will still be on the hook to the primary lien holder for whatever is owed to them.
2. The Mortgage Forgiveness Debt Relief Act of 2007 gave short sellers a big tax break by changing the way the forgiven amount was viewed for tax purposes. Prior to passage of the act, that amount was considered as income for the borrower and was subject to tax. However, the new law removed that tax liability.
3. Time is of the essence. While you negotiate with the lender, the clock keeps ticking. Do everything you can to get the lender to move quickly. Many short sales fall apart because the lender moves too slowly and fails to complete the deal before the property goes to auction.
4. Some buyers have successfully negotiated with the lender to minimize the damage to the seller's credit rating. The lender has no obligation to agree to this, but if you can convince them not to report this action as a black mark on the seller's record (and put this in writing as part of the deal), it will give the seller a big head start in rebuilding their financial lives. Typically, the loan will show up on a credit report as "paid," but it will carry a notation that says something like "settled for less than originally owed." That is more favorable than a foreclosure, but still negative.

Editor's note: Bobbi Dempsey is the co-author of two books on real estate including, "The Complete Idiot's Guide to Buying Foreclosures," for which she researched extensively the short-sale process nationwide.