The Short on a friend's Short Sale

Recently a friend confided in me that he is "upside down" in his mortgage. This is where you owe more for the house than what the house is worth. For the simple reason that I cannot pass judgement on my friend I have decided to help him out. He can't refinance, the lender will not modify the loan and he doesn't have the funds to maintain the monthly payments. With my friend's permission I call his bank to obtain their Short Sale packet and inquire about their policies. I first had to educate my friend that foreclosure is a legal process with timelines. A journey not a destination.
Preforeclosure, Public Auction and Postforeclosure are the three main phases of the process. My friend is in Phase 1:Preforeclosure. This is where he is 4 months behind in mortgage payments, including late fees, and the lender has sent a Notice of Intent to Foreclose. It is very wise at this point for my friend to do all that he can to save his home or at least his credit rating from plummeting even more. Since there is no chance of refinancing and he cannot make the payments we are going to place the house on the market, sell the house for less than what is owed on the loan and submit a solid proposal package to the lender outlining why they should accept a reduced price for the home. Lenders are in the business of lending not owning houses and they know that if the property goes to auction and does not sell (REO) it will be difficult to sell for full price. And we'll ride off into the sunset...Not so fast...not everyone will meet their lender's criteria for a Short Sale. The lender will look to see if the homeowner is insolvent; you can't have a pot of gold sitting in your savings account and you must demonstrate a hardship; medical bills, lose of a spouse. All of his documents (pay stubs, tax info, w2s etc) and the hardship letter will be taken into consideration along with the proposal and hopefully a buyer's offer. As long as the lender approves of the sale, after many phone calls of negotiations, my friend will sell his house and prevent foreclosure. The house will go on the market next week so wish us luck. I'll keep you informed on our progress.