There's a whole slew of ominous terms being bandied about these days when people talk real estate. With some northern US towns hit so hard by the housing downturn that over 30% of their houses are empty, the increase in anxiety is no great wonder. But homeowners need not panic, there are alternatives to foreclosure.

Getting in over your head financially doesn't have to mean walking away from your home investment. As a first step, you should always try to work things out with your bank. Contact them as soon as you're having trouble with your payments. Banks don't like foreclosures and you may be able to make a deal that will make your payments bearable and allow you to keep your home. There are also some programs though HUD that can help you stay put until the market balances out.

Of course working out a deal isn't always possible but saving your credit rating is. Once you've exhausted your options, you may want to try to negotiate a short sale.

WHAT IS A SHORT SALE?

When your home is worth less than its mortgage ti's known as an upside down mortgage. When a lender agrees to absorb the difference in a sale, it's called a short sale. Like a last exit before foreclosure, short selling your home won't make you any money but when your debt is more than you can handle, negotiating a short-sale may rescue your credit rating and let you avoid the embarrassment of foreclosing.

In order to qualify for a short sale:

1. Your loan must be in default at least two months

2. Your house must be worth at least 63 percent of what you owe and sell for at least 82 percent of the "as-is" appraised value.

3. You must sell the house within three to five months

4. You must convince your lender to assume the cost of the short sale:

THE COST OF SELLING = Real estate commissions + Taxes + Closing costs + Title fees + Liens of record + Balance of all loans on the home including interest and late fees

THE COST OF THE SHORT SALE = Cost of selling - Appraised value

Once these figures are delivered to the bank, the lender can take up to 45 days to balance the cost of the short sale against the cost of a foreclosure. Not every lender will agree to a short sale though, which is why hiring a realtor may be the best way to negotiate this kind of deal. Contact a realtor in your area that's experienced in negotiating this type of arrangement. They may have more leverage with lenders and be able to guide you through the process. They will also be able to help you find a buyer.

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