Short Sale Department, LLC
Have you thought about your relatives assuming your loan? (Taking over the payments) Maybe you can speak to your mortgage adviser or seek legal counsel. A short Sale to a relative is not permitted.
To answer your other question - Yes! you have to put the house on the market to show that you have tried to sell at the highest possible price. The lender wants to get the maximum from the sale of the house.
If you need my service in selling your house, please let me know at 510-366-9405.
Certified Short Sale Specialist
It is VERY unlikely that the banks will let you sell to anyone who is related to you. They view it as a conflict of interest. We've asked this question directly of lenders and the answer has always been no. Let me know if you'd like additional information.