An increasing number of homeowners behind on their mortgage and facing foreclosure are finding solutions to sell despite the large inventory of homes for sale in the current market.

Their solution is called "short sales". Short sales are similar to regular home sales except an agreement is reached in which the lender accepts what the house is appraised for or what it will currently sell for instead of what is owed on it. try to get your home marketed everywhere to sell it, even on foreclosure lists where investors are looking at potential purchases.

So a buyer who wants to pay the current market value of the home buys it from the homeowner, and the lender absorbs a loss on the difference.

With foreclosures rising to three times what they were over a year ago, lenders are more motivated to do a short sale because they at least get most of what they are owed.

Homeowners benefit too as don't get the worst derogatory there is on their credit report which is a foreclosure. However, sellers don't receive any equity from the sale. Although lenders absorb a loss on the money they're owed, a short sale lets them avoid a costly home foreclosure which can sometimes cost between $30,000 to $50,000 per house in legal, marketing, and expenses not to mention advertising. A short sale will get a home off the lender's inventory , (also known as bank repossession list) and typically costs a lender less than a foreclosure by nearly $20,000.

To be considered for a short sale by the lender, homeowners must prove they can't pay their mortgage because of some type of hardship such as loss of job, medical expenses, death of a spouse or, in some cases, just too much debt such as an adjustable rate mortgage resets.

A homeowner's credit score does decrease significantly but not as much as a foreclosure.

As an example, a homeowner involved in a short sale could realize a 80 to 100 point drop on their credit score. Experts say a foreclosure is around 250 to 280 points

Even when short sale is complete, homeowner aren't out the woods, they will also have a tax hit to Uncle Sam. The tax hit is the difference between what a homeowner owes and what the bank receives for the house, and it is treated as income. This taxable income will show up on form 1099 from the lender for the homeowner. Therefore, it is recommended that you consult with a CPA or tax attorney.

Some alternatives if you want to keep the house are: 1.) you can try to rent it to a family or individual which hopefully covers the mortgage or a great portion of it; or 2.) get a Foreclosure Bailout Loan if you are close to foreclosure and short sale is not working.

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