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With more sellers unloading their homes for less than what they owe on their mortgages, now's the time to start negotiating short sales with lenders. Here are some tips to get you started:

Find the property. Research online or contact a local real estate agent who specializes in handling short sales.

Meet with the homeowner and come to an agreement. First to find out how to approach distressed homeowners. Once the homeowner agrees to a short sale, get a "release" or "authorization to release" information, which is a letter signed by the owner that allows the mortgage lender to talk with you about the mortgage. Laws prevent lenders from releasing mortgage information without the borrower's written consent.

Contact the lender and ask for the department that handles short sales. They may call this loss mitigation, asset management or REO management. Find out three things:

• If the lender will agree to a short sale
  
• What additional information they'll need to complete the process
  
• The payoff quote schedule, which is what the lender thinks they are owed

Loss mitigators sometimes receive bonuses based on how many defaulted loans they can clear up, so they're more likely to pay attention to your sale if you can show them you're taking care of as many details and objections as possible.

The lender, on the other hand, will be considering many factors in deciding whether to approve a short sale, including:

• Whether the seller is deserving of a break, due to financial hardship caused by unforeseen circumstances such as layoffs, divorce or illness
  
• Whether it would be cheaper to simply repossess the house, make any necessary repairs and sell it through a real estate agent or broker
  
• How many other properties the mortgage lender currently has in default

Work with the homeowner to get required documents to the lender. This may include: a hardship letter (which explains the seller's financial difficulties in writing), payroll stubs, copies of medical bills, checking account statements, financial statements, two years of tax returns, credit report, a signed purchase contract.

Be organized, thorough and professional when working with the lender. As you negotiate on price and terms, use this information to help make your decision:

• foreclosing loan balance
• other outstanding liens
• estimated market value of the property
• rate of real estate appreciation in the area
• potential for increasing the house's value by making repairs and improvements

If you're willing to put in the extra time and work, you may be able to find a deal with a short sale.

GO TO: Part 1: Getting Started

GO TO: Part 2: Pre-Foreclosures

GO TO: Part 3: Foreclosure Auctions

GO TO: Part 4: Bank-Owned or REO Homes

GO TO: Foreclosure Guide

More on FrontDoor:

• Search Homes for Sale
• First-Time Homebuyer's Guide
• Experienced Homebuyer's Guide
• Home Finance Guide
• Home Seller's Guide
• Tools and Calculators