You owe more on your mortgage then your home is worth and you need to sell. Don't panic yet! There are several options available to you and a "Short Sale" is one of them.
Below is a quick summary of those options. I am available anytime by phone, email or in person to discuss your specific situation and put together the best course of action for you.
First of all, you are not alone. There is nothing to be ashamed of. Everyone is aware of the poor economy and the bursting of the housing bubble. Recent data shows that about 40% of all homes sold were either "short sales" or in some phase of bank foreclosure. Almost any one that bought since 2003 is "underwater" on their home, meaning they owe more then they can sell it for.
So here are the options if you need to sell;
Re-negotiate your mortgage - If you think you need to sell because you can no longer afford your mortgage you may be able to "modify" your mortgage. Banks are setting up programs to offer this. They may reset your homes value to its current value and/or re-set the interest rate. Unfortunately this option has not panned out well for those you have tried it. The programs have not been completely fleshed out yet and even when they do they may only save you a couple of hundred dollars. I continue to monitor the banking situation and will update this space accordingly.
Rent - If you need to move then renting may be an option as well. You need to determine what you can rent your home for and if the rent will cover all or at least most of your total costs (mortgage, insurance, taxes, maintenance, water, etc). You also need to prepare yourself to be a landlord. It is very important to understand the tenant screening process, rental laws, management options, among other things.
"Deed in Lieu of" - This means handing the home (its "deed") over to the bank that holds your mortgage "in Lieu of" a traditional foreclosure. Banks are more likley to accept this option because it is less costly to them then going through a drawn out foreclosure process. You may not be totally off the hook - they could come after you for the outstanding balance owed after they sell the home. There are attorneys that can help you negotiate with the bank and get the best settlement possible for you. There is not avoiding the blemish to your credit that will last 7 years or longer.
Foreclosure - Nasty word and one that you want to avoid at all costs. Your credit gets ruined and the emotional impact is obviously severe. It is a long process and gets ugly if you are trying to fight it. Option of last resort.
Short Sale - The best option may be a Short Sale. In a Short Sale you negotiate with your bank ahead of time for them to accept a lesser amount for your home (what the home is worth now) rather than what you owe. Usually this results in the bank not coming after you for the outstanding mortgage balance and the bank pays for most of the closing costs! A Short Sale also has less impact to your credit report. You maintain some control and you avoid the emotional stain of a foreclosure.
A good Realtor can walk you through the Short Sale process and discuss the pro and cons. An experienced Realtor can also help you best prepare your "financial package" that you need to submit to the bank for their approval for the Short Sale process to start. Make sure your Realtor has done at least 4 or 5 of these already and is also refreshing their knowledge with the constantly changing banking industry.
Contact me anytime and I would be happy to discuss my experience and how I can help you through this.
A few good sources for Short Sale information;