The decision whether to try to short sell your home or let the bank foreclose is one that should be made only after consultation with an attorney and tax adviser. Any choice you make will have consequences that are too important to leave to chance. Once you have received professional advice, try to work with your lender toward a modification or other consideration.
The bank will ask for lots of documentation, such as a hardship letter, copies of bank statements and pay stubs, and lists of assets and liabilities. Provide everything they ask for in a timely manner, and keep copies of everything you send them. In addition, keep detailed records of all communications with the lender, such as emails and notes of telephone conversations.
While every situation is different, there are a few reasons why a short sale can often be better than foreclosure:
- Neighborhood property values are usually better preserved when homes are sold in a short sale rather than taken over by the bank.
- Your credit rating may take less of a hit with a short sale.
- You may be eligible for another home loan in a shorter period of time with a short sale.
- You may be eligible for up to $3000 in relocation costs from your lender.
The Department of Housing and Urban Development website explains several available programs that might offer assistance, and provides a list of approved counselors. Stay away from anyone who contacts you and asks for an upfront fee in return for promises of assistance.
I have worked with many, many sellers who are upside down on their mortgages, and I would be happy to answer your questions or help in any way I can.
Posted by: 
Deborah Byrne
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