Banks typically don't initiate a short sale, they typically initiate a foreclosure via filing a lis pendiens against the property/property owner. This is done when the owner is behind on the mortgage payments. As a means to avoid foreclosure, the owner will oftentimes attempt to sell the property to repay the mortgage, or a portion of it. Once this process is started, the bank will need to agree to sell for less than is owed on the property....thus making it a short sale.
It really gets confusing, and is a complex process...hope this helps!... more