SHORT SALES:What if I Owe More Than What its Worth?
OPTIONS* WHEN YOU OWE MORE THAN IT'S WORTH
HANG ON TO THE PROPERTY (if possible) Being "Upside "Down" is not necessarily a crisis if you do not HAVE TO sell. If you are able to make your payments and don't need to move, you can stay put and wait for property values to go back up.
LOAN MODIFICATION You can try to negotiate with your Lender/Bank to reduce the principle, adjust the rate, forgive the unpaid balance, or any combination of the above, to make your payment more affordable or reduce your balance. Banks may not negotiate and the process could take a long time.
DEED-IN-LIEU OF FORECLOSURE You can ask your Lender to "take back" the property (you sign the Deed back to them) If they agree to not foreclose, and allow your debt with them to be settled in exchange for taking the property back, you can walk away with owing more money. Be sure to get everything in writing.
FILE BANKRUPTCY This option may postpone a pending Foreclosure action against you, but probably not forever. Eventually, you could loose the house if you are behind in payments and avoid seeking another solution. Bankruptcy can damage your ability to get credit or financing for years to come.
DO NOTHING & LET THE BANK FORECLOSE If you avoid seeking a solution with you lender and stop making payments, there is a good chance you lender will foreclose. This usually means they can evict you from the house, and take the property back. A foreclosure usually stays on your record for many years and getting credit or home loans could be very difficult. This is usually the worst option for most people.
SHORT SALE You can hire a Realtor to sell your property and negotiate with with the Lender on your behalf to have them forgive the "shortage" in the amount you owe after selling the property. If the lender approves the short sale, you will not make any profit, but YOU WILL BE FREE OF THE DEBT, NOT OWE ANY FEES OR COMMISSIONS, and may even qualify for special programs that give Short Sellers relocation funds.
* Be sure to consult the proper professionals for advice on any of these options - such as an Attorney, CPA, Financial Adviser, and Realtor.