Going short in this case has nothing to do with the short position people take in the stock market, hoping to profit from a declining price of a security. Short sale in real estate is a concept where the homeowner is allowed by the bank to sell his property for less than what his mortgage balance is. It's one way to avoid the dreaded foreclosure.
Before a short sale is even discussed, the lender needs a hardship letter from the borrower/ seller, a valid contract between buyer and seller and a preliminary settlement statement. The homeowner must prove a severe financial hardship to get the lender's ear. Once all the paperwork is in, only then the negotiations can start. Please click on the link in this paragraph to read the entire article.