Short sale process

[Vicki K.]

Neighbor down the street from me puts a "For Rent" sign in his yard. We look online - no MLS listing. Property up for rent by owner on Craigslist. I email the guy and ask him if he has considered selling his home. He tells me he would absolutely love to but is way up side down on it to make it happen.

He owes:                         $184K or so

Property market value:    $115-125K

Loan is though:                Bank of America

I have spoken to each other in the past. He knows I am own rentals so he came by to ask me for some advice about being a newbie landlord.  I told him to think about a short sale instead as this is a losing proposition for him. No cash flow; just headache. 

How is the bank calculating an acceptable sales price? Is the market price of the home the determining factor or the amount the person owes. Will an offer of $80K be acceptable? At that price point this house is a phenomenal deal. Depending on how updated it is (I haven't seen the inside yet), I'd be willing to go up to $90K even. The seller is very motivated. Has considered walking away, but doesn't want to ruin his credit. I own 5 homes in this specific subdivision and they are fantastic rentals.

Any advice on the pricing as well as how short sales are structured would be greatly appreciated.