Alternatives to foreclosure

When you can't make the payments any more, for whatever reason, you do not necessarily have to go through a foreclosure. We've previously discussed some ideas here. There are others in tighter situations. It may seem unavoidable, particularly when you owe more than the house is worth, but there are alternatives. The most common of these is the Short Sale. It is called this because the bank holding your mortgage agrees to let you sell the house for whatever it's now worth and they agree that they'll accept less than they are owed if that's all the property can bring on the open market. In essence, the bank comes up 'short'. This doesn't mean that all is suddenly wonderful and rosy again. There are a few things to be aware of in such a situation. First, a short sale will still result in a hit on your credit record--just not as sever a hit as a full foreclosure. Second, you will likely incur a tax liability. Tax law considers any debt forgiven (your unpaid mortgage amount, for example) as regular income and taxes must be paid on it at regular income tax rates. Consult your tax advisor on this aspect. But, a short sale may still be better than waiting for the foreclosure. You at least can get on with your life, and at less a disadvantage than a foreclosure. Call your Realtor to discuss the idea. Make certain that he or she is experienced in this type of transaction. Just being a Realtor may not be enough, due to the fact that the process is very specific as to what a lender will want from you to agree to allow you to do such a sale. Ask your Realtor if they have experience in the field, and, if not, if they or their broker can refer you to someone who does have that experience. Then work with them. Good luck.