Seller's, if there is a remote chance your home will need to go into a short sale, investigate early, keep your file for submission ready continuously and act quickly when you know. That's the advice a client of mine ignored for the first 4 months I had his house listed.
He desperately needed to sell his home. It was a wonderful home. Under the right conditions, it should sell easily and quickly. When I activated his listing, he called me within the hour to say he wanted to raise the price. I had done extensive research showing where it was most likely to sell. He knew his new price was out of range of the comps and I explained that with the inventory in his neighborhood it would likely sit, and it did.
For months, I pleaded with him to go with a short sale because his house was never going to sell at the price listed. It wasn't radically overpriced (right at 6% above the market), but the sale range was very tight and specific. His neighborhood had a dozen properties sell during those first four months, and everyone was within the range of the comps shown to him in the very beginning.
When he finally decided to seek a short sale, he was granted permission, but the bank would only allow a short window to get it sold. He received a contract right away, but he was slow getting some of his necessary paperwork in and the bank rejected the offer and canceled his short sale.
We immediately went back to work to get it back into a short sale. This time, my client was on top of things and got all of his paperwork in on time. An offer was made, and the process was moving along smoothly. A few days before closing, the buyer walked. It had only been 40 days from contract to proposed closing, but she had a family emergency that caused her to give up on the house.
We went back on the market, and we received another contract immediately. This time, the clock ran out. The bank was tired of messing with the short sale, rejected the great offer and encouraged the client to do a deed in lieu of foreclosure. If he had sought a short sale early, he would have made it across the finish line months ago. But, because he hesitated, because he didn't take it seriously and because he assumed he knew more about the market than the professionals he will either do a deed in lieu or get foreclosed.
Seller's, if there's chance you will need to do a short sale, approach it early. Otherwise, you're likely to lose more money on a home that will end in foreclosure.
Seller's, if there is a remote chance your home will need to go into a short sale, do these things.