What's the hottest subject right now in residential real estate investing?

No question about it: Picking up houses at great prices through short sales-transactions where lenders agree to take less than they're owed and allow financially-stressed home sellers to avoid foreclosure.

One top specialist we talked to -- Raffi Tal of iShortSale.com in Los Angeles -- has nearly 900 transactions currently in process, concentrated mainly in places you'd guess-California, Nevada, Arizona and Florida.

The volume of short sale requests "exploded" in the final three months of 2007, says Tal, as lenders "finally began figuring out that they'd lose a lot more money through foreclosures than they would through (negotiated) short sales" to local investors.

But nobody involved in short sales -- whether Realtors, investors, lenders or the home sellers themselves-should assume that these transactions are as quick or straightforward as the name sounds.

The time required to do them is almost never short, and the haggling needed to pull deals together can be intense.

As Mr. Tal put it in our discussion: "Everything has to be negotiated, everybody wants to come out of the deal on top," and there are lots of potential complications along the way.

Take one of the most commonplace sticky situations-houses that have not just one mortgage liens against them, but two or even three: A first mortgage or trust deed, a "piggyback" second trust and a home equity line.

The home owner may be four months behind on the first trust and the property may be worth $100,000 less than its original price, but all of the lenders with liens on the property need to agree on terms before a short sale can proceed.

And there's the rub: In a foreclosure, the junior lien holders typically would get wiped out. But in a negotiated short sale deal, they're likely to hold out for at least a little piece of the proceeds -- maybe 10 cents or 20 cents on the dollar, rather than settle for nothing.

All that has to be hammered out. It takes time -- and good negotiating skills.

Plus, there are lots of other complications that can pop up-starting with -- what's inside that title report? What appraised value will everybody accept? And who's financing the new buyer?

In upcoming reports, we'll tell you more about the issues everybody needs to know before plunging into this year's red hot short sales market.