As others have noted, it's unclear that this will even be treated as a short sale by your lender. Before getting too far into this and becoming disappointed, I would recommend the importance of gathering additional information.
1. Is the owner's lender willing to work with them on a short sale?
2. Have they begun the application process?
3. Where is the seller in the "short sale" process?
4. Are they being supported by an attorney in this process?
There is a big "red flag" here....owing $170 and asking $230 doesn't have the earmarks of a short sale.
Proceed with caution.
As the other posters pointed out, if the owner only owes $170K on the first mortgage, there must be a second mortgage or this would not be a short sale. Ask your realtor what the CMA or BPO price is that they calculated for this listing. In a Short Sale, the banks are generally willing to accept 75%-80% of market value. I hope this helps. Good luck.
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Prudential Joyce realty
Accredited Short Sale Designation
Luxury Distressed Property Designation
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The bank will make assignments for BPO's (broker price opinions) to get a feel for market value when they have a contract and ALL paperwork in hand. There is no way to predict.
If you are being represented by a Realtor, ask him/her to do a full Comparative Market Analysis for you and to be specific to immediate neighborhood and only sales within the last 90 days.
Most of all, be patient.