If this gets too complicated you may want to speak to a Real Estate Attorney.
It's been my experience that the banks usually pay the liens so the property can be sold. It's not worth hanging on to the property. Of course it depends on all the factors and you may want to consult an attorney since this isn't legal advice. You may be surprised to find out you can probably buy a house pretty quickly and also qualify as a first time home buyer and get down payment assistance regardless of whether you owned a home in the last 3 years or not. I've helped people get upwards of $80K in down payment assistance and helped them get back on their feet.
I can tell you that I am a licensed and certified Real Estate Appraiser as well as a Licensed Realtor. If banks won't buy or sell investing their hundreds of thousands of dollars without the professional advice of an appraiser and if the Federal Housing Administration will only accept a "Certified" appraisers stamp of approval on a property. Why would you do any less? Please feel free to call me at my cell: 909-917-6176. My clients receive the benefit of my expertise as a Realtor as well as a "Certified" Real Estate Appraiser.
I also have access to much more data than most real estate professionals do because I must pay for it and use it for appraising. This allows my buyers to find properties many don't even know are for sale. My sellers also know they will get top dollar for their properties because I can see the value as an appraiser and what improvements will benefit them most.
In the end however, Your transaction will be about you and what's best for you. I've actually advised people against buying or selling regardless of my loss of commission because of my knowledge of the market. I figure what goes around comes around. I help people that haven't owned a home in the last 3 years get first time home buyer down payment assistance even though the commission is less and there is more work to do. I know that if I do a good job for my clients and can show them I care, they will always send the blessing back to me.
Feel free to call and pick my brain. :)
In the meantime, God Bless,
As far as the short sale, the recommendation of having the agent to get a title search is important. This will provide the information as to all the liens attached to the property. In order for the property to be sold, (short sale or regular) it will require all liens on the property (mortgages, liens, taxes and even personal taxes for owners, back child support and alimony) to be paid through the proceeds of the property or by an agreement reached by the seller and the lien holder of the property being sold.
It becomes complicated if the property has more than a first mortgage because not only do you need permission from the first mortgage to take less than what is owed, you also need them to provide some of their proceed to go towards the pay off of the other liens, and then you need the other lien holders to take less than what is owed to them. (That is why it is called a short sale the amount being paid back is short). A lot of work and a lot of communication is required. Remember that the property needs to be clear of all liens to be transferred through sale.
If the property is foreclosed, depending on the type of liens will give you the answer if in fact the other lean are released and if there are any repercussions to the owners as to liability on the released lien.
Good luck and let me know if you need anything else.
Make sure your realtor knows how to handle short sale cases and if not ask him to get someone to assist him/her. The process is not easy and communication is the key.
First Weber Group
Certified Distressed Property Expert