How does it work, and why does it take so long, the lender wants to take my commission? I hear that all the time. First, you need an expert if you want do do a short sale successfully. Don't think just because a person is a Realtor they know how to do a short sale. Look for a CSP Certified expert. There aren't very many around, but you want to make sure the Realtor has a track record of getting them closed.
Let me tell you how a short sale works, then you might see why it is a lengthy process. First, you must to a good CMA based on solds (last 90 days)and listeds. You want to be priced about 5 to 10% below your closest competition.
A lender will not start negotiating before you have an offer so don't expect to have a price you know they will take. Once you have an offer, you will need to gather information on the buyer as well as the seller. You want to make sure the package submitted to the lender is complete. Anytime a lender has to ask for anything, it will delay the process. Once a lender has a complete package, it will take up to 30 days to have a negotiator assigned. Once that happens, a BPO or appraisal is ordered. That will take another 10 days or so. Once they have all that, then the negotiator will review the offer. Remember, if they still need something documented, it will delay this process even further. This will take about 2 weeks up to 30 days. If the offer is within 90 to 90% of what they have determined is fair market value, then they will give it to management.
Management then has to decide if this offer will work. What is in their best interest, to foreclose and have all other liens go away or to take this offer. It is strictly business. Depending on the loss amount, it may have to go through several tiers of management. If there is PMI, then it has to go to them for approval. After all that, it goes to the final investors and that takes an additional 2 weeks or so. At the end of about 90 days (without any delays) you will get an approval letter that will outline exactly what amount of money they will end up with, how much your commission will be and when you need to close.
Generally speaking, whatever is on the HUD you submitted with the original offer, is going to determine their approval amount. They are going to use that "proceeds to lender" number as their bottom line, so if you haven't added enough for taxes, HOA fees, etc. you may be eating it. Most lenders won't allow more than 5% or 6% commission, but I always ask for more, let them tell you it's too high, don't start low and have them lower it further.
From this, I'm sure you see why it takes the time it does, and the importance of having a professional working on it. If you know of an expert then co-broke with them, you both get paid. The lender is not trying to rob you of a commission, they just take your word for what they should net, if you don't do it right, guess who gets to pay it? That is why many inexperienced agents end up working for free and don't want to do short sales.
Educate the buyers, let them know that the process is going to take at least 90 days. Take an EMD and make the closing date 90 days out. You avoid alot of "fall outs" when you do it right.