Usually the bank that holds the present owners mortgage will want some kind of clause written into the contract that it is a short sale and the wording varies from bank to bank. There will also be some standard legal verbiage your lawyer will want in the contract to procect you. For example, the whole contract has to be contingent on the current owner's present mortgage banker accepting the short sale, If that does not happen you would get your down payment back. Also, there should be what we call a kick out clause. Meaning that if it takes to long for the current banker to approve the short sale, you would have the right to either cancel the deal and get your down payment back or continue to wait if you prefer.
Although I am not an attorney and cannot give you legal advise, you must have your own attorney guide you through the process. These are simply things I have come to see in short sales that I have been involved with. If I can be of further assistance, please let me know. Good luck!
Mitchell S. Feldman
Associate Broker/ Director of Sales
Madison Estates & Properties, Inc.
Office: (718) 645-1665/ Cell: (917) 805-0783