Buyers can use an online database, such as a Multiple Listing Service, or consult real estate professionals who have experience in short sale transactions. Aside from "short sale," some key phrases to look for are "subject to bank approval," "preforeclosure," "third-party review required," and "pre-approved by bank" which may indicate that the property is being sold on a short sale.
"Approved for short sale" means the bank has already determined that the homeowner qualifies for a short sale and has approved the request to sell the property at a reduced price. It is possible that an earlier buyer made an offer that was approved, but did not close the transaction. Making an appropriate and timely offer on an "approved for short sale" listing may be a quicker process because the seller no longer needs to be qualified.
"Third-party review required" means the homeowner has not sought approval yet from his/her lender to do a short sale or approval is pending review of the homeowner’s application. This means the process could take longer. Plus there is a risk that the homeowner will not qualify for a short sale in which case the property will need to be sold at a higher price.
A settlement statement, also known as a "HUD-1," shows how the money from the sale is distributed to all of the participants in a real estate sale. Before the seller's mortgage lender approves a short sale, it will look at the proposed settlement statement to review the following:
These items provide the lender an idea of the buyer’s capability to purchase the property and the extent of the lender’s loss if it approves the short sale with the buyer’s price offer.