Banks will require that the homeowners have a financial hardship and currently be insolvent at the time of the short sale.
If you do have to sell your home you have four options. First, if you have the money you can bring cash to the table. You can bring the cash difference at closing to provide the banks with their full pay off. This is not a short sale as the banks will be getting all of the money that is owed to them.
A second option would be to let the home go into foreclosure. The lender will go through the foreclosure process, force you out of your home and then auction it off to the highest bidder at a foreclosure or Trustee’s auction.
The third option is a deed-in-lieu. Basically this is still you losing the home but you agree to hand the keys over to the bank, leaving the home clean and in marketable condition so they can avoid the legal process of foreclosing and sell your home quicker.
The fourth third option is to pursue a short sale. You sell your home at fair market value and then negotiate with the bank(s) to explain the circumstances and convince them to take less than full value of their loan.