A short sale is when the property is worth less than the debt owed on it and you offer the bank less than what is owed so someone can purchase it. A relative may offer to buy your home for what would be obtained at auction. Personally I see very little advantage to the homeowner in doing a short sale unless you are attempting to keep the home and a relative is purchasing the property.
A short sale forces you to do all of the work of selling the home for the mortgage company. Your credit receives virtually the same damage whether you short sale or have a foreclosure. You can do all the work, give the bank a fair offer and still have them refuse it. It there is a second mortgage you have to make two banks accept your offer. It may get you out of the house sooner than if you had just stayed in it. A short sale will often leave you owing the deficiency and definitely leave you with an income tax problem for the deficiency. Many of my clients simply let the home go back in foreclosure living in it until the sale date and simply file bankruptcy to avoid the tax problem and any possible deficiency.