Do you have questions about a short sale, a deed-in-lieu of foreclosure, or tax penalties? Have you been approached by someone who wants to charge money to help you? Are you being pressured to sign over your deed?

In Part 1, you created a file folder so you are prepared to deal with your lender, include loan docs, proof of income, and a hardship letter.

If you are willing to let your house go, consider more options, such as:

1. Sell & Pay Off Loan. Before selling, ask your Accountant if you will owe capital gains taxes to the IRS. Then consult your local Realtor® to calculate your house's value, the closing costs, and your proceeds. If the value of your house is lower than your loan amount, read the next section about Short Payoffs. If you have a CalHFA loan, you may owe recapture taxes.

2. Short Sell (Short Payoff). In a short payoff (short sell), a buyer offers to buy your house for less than the amount owed on your loan. Unless you have the funds to pay the difference to your lender, your lender would have to agree to accept less than what is owed on the loan. They'll ask you for your financials, and may ask you to share in their loss (such as contributing funds from your retirement account). You may owe taxes if your lender files a 1099-C declaring their loss as your income; however the President just signed a new law which will waive this penalty for some homeowners. Ask your Accountant about it, and also whether or not you will also owe the IRS capital gains taxes.

3. Deed-in-Lieu of Foreclosure. Essentially, you give the property to your lender and walk away. The lender then owns the property, and usually try to sell it. If the property sells for less than the loan value you owed, the lender takes a loss. In some cases, they may issue you a 1099-C and you will owe taxes to the IRS; however check with your Accountant and see if you qualify for the waiver under the new law. The lender will ask you for your financials and will probably order their own appraisal before approving this option. They will probably want to see that the property has been marketed for sale for at least 3-6 months before they consider a deed-in-lieu. The lender may ask you to sign a promissory note to repay the difference, so be sure to have all contracts reviewed by your attorney before signing.

4. Do Nothing and Allow Foreclosure. If you don't pay your mortgage loan and don't communicate with your lender, your lender will eventually foreclose. You will lose your home and your credit will be marred by a public record of foreclosure. Even worse, you may still owe money to the IRS, depending on your situation!

Every situation is different, please consult professionals for the best advice. In Part 1, it was recommended that you contact the following experts:

• Attorney (must be experienced with real estate or bankruptcy) - a good lawyer will advise you of your options, review your contracts, and negotiate with your lender. Find an affordable attorney plan a pre-paid legal service at www.BrownBiz.net.

• Accountant (or an Enrolled Agent) - to help you calculate your anticipated IRS tax penalties. Find at AICPA organization or NAEA organization.

• Real Estate Broker - a pro experienced in mortgage loans, home sales, and short sales. Go to the Realtor web site.

• Financial Counselor - you need a consultant to help you negotiate with your lender and "go to bat" for you. Contact www.RealEstateProExpert.com to get in touch with a pro.

How long will the foreclosure process take, and what are your rights? To find out about the foreclosure laws and procedures in your state, go to www.preforeclosureusa.com/foreclosure-law and click on your state.

If you want to consider some short-term solutions to avoid foreclosure and keep your house, look for Part 1 of this series, the article entitled, "Avoid Foreclosure and Save Your House with Short-Term Solutions". However, if prefer long-term solutions to avoid foreclosure and keep your house, look for Part 2 of this series, the article entitled, "Avoid Foreclosure and Save Your House with Long-Term Solutions".

More info on your stop foreclosure information search:

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