A short sale is a payoff to the lenders for fewer than the sum owed on the total balances of all mortgages.

A short sale requires the lender's approval (any lender that is getting "shorted"), so it's usually more complicated and takes longer than a standard sale.

Do you remember all the paperwork required when you first applied for a loan? That is exactly the same paperwork that is required for a short sale.

In addition, the lenders will need to see some extra paperwork . In a nutshell, the paperwork required by most lenders is:

• Income tax returns and W-2 or 1099 from most recent 2 years

• Most recent pay stubs x 1 month--4 months

• Most recent checking account statements x 2 months -- 4 months

• Most recent savings account statements x 2 months -- 4 months

• Most recent IRA, 401 K, etc. statements x 2 months -- 4 months

• Hardship letter (written in your own words, -- tell the lenders exactly why you cannot make the payments-whether it is job loss, hours cut, divorce, payment increase, medical problems, etc.)

• Financial Statement Most lenders will require you to fill out a complete financial statement, where you will list all your assets (houses, properties, IRA, 401 K, checking accounts, savings accounts, etc.) and bills owed (all mortgages, credit card debts, student loans, all other debts & liens, etc.)

Tom and Barbara (not their real names) called me just the other day and wanted me to do a short sale on their home. They were referred by a very happy client whose short sale I had just closed. However, there were huge differences. Tom and Barbara lived in a home (NOT the short sale property) that had over $100,000 of equity in it. I advised them not to do the short sale on the property that they had just moved from. I told them that I'd make money, but that I did not think that a short sale was in their best interests. Keep in mind that the lender's job is to mitigate (or reduce) the amount of loss that they are experiencing. Therefore, their job is to get as much money out of you, the Seller, as possible. If you have a group of other assets, such as other homes, mainly with a lot of equity, you may want to think twice about performing a short sale on an investment property. You don't want to have your assets as a big fat target for the lender! Every time you talk to the lender, the conversation usually starts out saying, "We are advising you that we are a debt collector, and any information that you give us may be used to collect a debt ."

I've counseled many people against doing short sales for the above reasons. Yes, I'll make money on it, but it may not be in your best interest to do a short sale. Again, I am not an attorney. This is not to be construed as legal advice. Always get advice on your particular situation from your tax expert and your attorney for tax and legal implications of a short sale .