Unlike what you may be reading, you can begin the short sale process anytime. While the rule of thumb we all hear is the bank won't discuss a short sale until you are 60-90 days late, that is not accurate.
You can begin the process with the bank before you are late with your first payment. When payments are continuing and a short sale IS being pursued, I've been able to bypass the lender's collection department and get into the Loss Mitigation Department faster. Once the process begins with the loss mitigation department, I am seeing it take up to 90 days to schedule the BPO with certain lenders.
After the BPO gets to the lender, the process can take anywhere from 1 week to 30 days to get averbal approval. Foreclosure can take anywhere from 4 to 10 months (depending on your location and lender...)
Be careful though if preserving credit is your concern...people get approached to do a short sale as a way to mitigate the damage to their credit by avoiding foreclosure, bankruptcy, etc. If you don't make payments during the short sale process, your credit will likely have enough late or non payments that will drop your score significantly - thus impacting your ability to qualify for leasing a vehicle, getting a mortgage, or renting.
The particular steps you should take will depend a lot on who your lender is, whether your house has been listed, your objectives and plans depending on the worst case scenario of the short sale taking too long, or not getting approved, and your particular hardship. Depending on your hardship, you may qualify for other options with the lender that have an advantage over a short sale.
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