It occurs to me that this business of short sales regarding the value of properties is not well understood.  Presently the true value of a piece of property is floating around in the air somewhere with no real attachment to the real value.   It is a question of new value, that is, what is the right price value of a property in a descending market and what do lenders want to see in terms of the value of a piece of property or, what is reasonable to expect from a lender in response to an offer that they  hold  a mortgage on.  And, what can a buyer expect  the lender  to accept  on their sour investment?

This is a question that does not have a hard set answer but, there are some accepted guidelines that can be used to determine this value.  Generally accepted guidelines:

TYPE OF LOAN          LENDER THRESHOLD?
                                       % of current market
Conventional                           92%               
FHA                                           82%                                                                          

These figures have nothing to do with the mortgage on the property or what the Seller would want to receive from the property but, the true value of a piece of property in this depressed market.   The way this is supposed to work is the Selling agent would determine the value of the property by a comparative market analysis with 3 like homes sold preferably in the last  30 days.   If the value of the property turns out to be, for example, $250,000 for a FHA Insured loan, then you would start by multiplying $250,000 by 82%  which equates to $205,000.  This number must be added to by commissions, escrow fees and other expenses inherent in the sale.  As a general rule we would add 8%.  To gross up by 8%, we have to divide by the inverse, which is 92% or.92 (100% - 8% = 92%).

Type of loan?                      FHA
Current market value     $250,000
Lender Threshold              82%
Closing Costs                     2%
Commissions                     6%
Additional liens                 $5,000
Calculations                     $250,000 X .82 = $205,000 / .92 = $230,000 then, add $5,000$230,000 + $5,000 = $235,000 (lowest price that would likely be accepted by the lender)
                                                     
This is a general guideline as to what is expected by the lender and a way to figure values in short sales.  Other options have also worked and the lenders do not always stick to these guidelines but, it is not unusual to take 90 days before the lender even looks at a proposal.  It would be prudent to at least run over these guidelines with buyers who want   to low ball a purchase, since they may invest time, energy and emotions into a sale which, after waiting 90 days, have the offer rejected.   Another question is, has the selling agent arrived at a sales price that recognizes current lender guidelines?