One Change to your info above, SD. Everything you have up there is right except the part where the banks won’t talk to you unless you are in default. This is the number one misconception about short sales.

You MUST have a legitimate hardship that you can prove. However, homeowners who KNOW that they won’t be able to make the payments should not wait to contact the lender with their hardship until they go late on payments. If you know that you are 2-3 or even 6 months away from running out of savings and not having the $$ for your mortgage, you can get the short sale process started immediately.

This is the case of people who are losing their jobs, or have lost their businesses due to losses in banking, construction and real estate. You have legitimate hardships that you can prove NOW and you can list your home immediately subject to approval of short sale. You stand the best chance if you can provide a complete financial statement, tax returns, bank statements and if possible your pink slip or lay off letter.

Your hardship letter need not be long or complex, as long as you clearly state at the beginning that you can NO LONGER PAY THE MONTHLY PAYMENT. Then a short blurb about how your income has changed or the new adjusted amount is beyond your means to pay. Then summerize by clearly stating that you can NO LONGER PAY THE MONTHLY PAYMENT.

You can still keep making payments on time up to the close of your short sale. You can even tell the lender, and show them with your bank statements that you won’t be able to make the payment past April, etc.

We’ve done this in Las Vegas with 3 short sales since November of 2007. The homeowner never went late, preserved their credit and successfully sold their homes on short sale.