Pre-Foreclosure Short Sale Question

[Alice Foster]

I'm a realtor dealing with pre-foreclosure and wondering if it's possible to make this work as a short sale. Scenario (changed the numbers slightly to keep it simple):

Seller owes 200k to bank. Liens and judgments for 20k. Offer at 215k with 3% commission 

I assume the mortgage must be paid before any liens or judgments if the owner sells before they go into foreclosure. So if we have an offer for over what he owes the bank, is it even possible to negotiate a short sale to take into account the liens and judgments? Basically offering them 7% under what he owes? Or will they let it go to auction before considering that..