A short sale typically is executed to prevent a home foreclosure. Often a lender will approve a short sale if they believe that it will result in a smaller financial loss than foreclosing. For the home owner, advantages include avoidance of a foreclosure on their credit report and partial control of the monetary deficiency. A short sale is typically faster and less expensive than a foreclosure. When there are multiple lenders that have liens on the property my experience has been that the lender(s) in second and third position etc. are willing to accept a small payment made on the closing statement together with an unsecured promissory note (with reasonable payment terms) in exchange for the release of their lien.  

One of the myths about short sales is that you have to be late on your mortgage. While some lenders may not be willing to negotiate with you unless you are late it is possible to do a short sale without missing a payment. Again, it depends on the lender and the seller’s financial situation.