Loosing your home through foreclosure can be devastating to your credit and your future. Foreclosure can keep you out of homeownership for up to ten years. The humiliation of foreclosure can break your heart.

     Sure, you wanted a house. Real estate values were spiraling upward so quickly, if you didn’t buy then, you’d never afford a home. Pressured by real estate agents hot for a big commission, misled by duplicitous lenders, you bought that new house. Now the market has plummeted. You may be paying a huge mortgage on a home worth one third less than you owe! And now your interest has jumped way beyond affordability. You’ve been screwed!

     Now, you’re made to feel like a dead beat because the economy tanked and you are left holding the bag. Fortunately, there are ways to avoid foreclosure. A short sale allows you to retain your dignity and lessen the hardship on our credit, especially if you are able to keep a credit card current.

     Short sell your house for less than the balance you owe, provided that your lender will accept the lesser amount. In a short sale, your house will be listed in the Multiple Listing Service and the house sold, as long as a buyer can be located. In the tight real estate market of today, this may work for you.

     Short sale will effect your credit score, which will see a 200-300 point drop similar to the drop experienced in a foreclosure. However, unlike the 10 possible ten-year wait after foreclosure, you may be eligible to buy another house at a reasonable interest rate in only 2 years.

     There are provisions to a short sale. While your payments can be current, you must show that you are in financial distress. Unemployment, divorce, health bills, family debt and credit problems constitute distress. Of course, if you blew the wad on wide screen TVs and luxury vacations, your credit problems will not appear as financial duress. If you no longer like your house or hate the neighbors, you are not eligible. But if you can show that your home is worth less than the original purchase price, easy to do now that the real estate bubble has burst – a short sale may save you from foreclosure. Nobody’s house is worth what it was three years ago.

     Thanks to the Mortgage Debt Relief Act, you may be spared the tax liability of debt forgiveness (in which debt forgiveness is treated as income).

     Assemble your financial information including assets, unpaid mortgage balance, actual income and comparable market analysis. That is, the current actual value of your home defined by closed sales of neighboring houses of similar age and construction. You also need to show financial hardship.

     Remember. A short sale is not charity. Plenty of people will make money on your financial duress including the real estate broker, lawyers, accountants, the new lender and the title company. The original lender avoids foreclosure and the wasted time and money while the house sits vacant. The buyer gets a bargain as well.

     Do not delay until it’s too late. Look around the neighborhood at those beautiful, overpriced homes. You don’t want to be left living on an empty street. Good luck selling a house in a ghost town.