Sometimes life gives you lemons… and sometimes it is my job to turn those lemons into something palatable. It may not be the best lemon meringue pie, or the sweetest lemonade, but it will be tastier than choking on the whole lemon rind and all.

A foreclosure happens when life deals you a hand that you can’t play. It’s like getting a pair of twos and your up against a royal flush.  Perhaps it is a job loss, or an illness and a person falls behind in their payments.

There are a few alternatives to losing your house and your good credit. If you have enough equity in your home, you can sell it, clear the mortgage and walk away hopefully with a jingle in your pocket. You have to realize that you can’t wait on this option. Banks will apply late fees that will eat up the equity pretty fast and those fees normally have to be paid at closing reducing the jingle substantially.

Another option is bankruptcy. I’m not a bankruptcy expert, by any stretch of the imagination, so you would have to check with a bankruptcy attorney to see if filing for bankruptcy will help you.

I am however, as close to being a short sale expert as an agent in this market can be.  I’ve done at last count over 25 of them in this small area market.

When you are behind in payments, or about to become behind, and you do not have substantial equity in your home, the first thing you need to do is talk with your mortgage lender. If you do it soon enough, you may be able to do a loan modification. Expect a loan modification package with a ton of paperwork to fill out and send back to them. Don’t let this paperwork cause you anxiety, just work though each piece of paper and answer the questions as honestly and straightforward as you can and do so as completely as humanly possible.

The mortgage company will then either approve a loan modification for you or deny it. Sometimes their loan modification program is still outside your budget. If loan modification is not possible, or is denied, there remains two more options.

The first one is usually a short sale. In a nutshell, the bank will agree to let you pay the mortgage “short”. Meaning they will take less than what is owed on the property. Many times a bank would rather do a short sale and get at least part of the mortgage than absorb the total loss. This does not automatically absolve a homeowner of the difference.

The mortgage company factors in closing costs and realtor fees and considers needed repairs. They will require you to list the property with a Real Estate Agent that is familiar with short sales and give that agent a limited time to sell the property. They will also do an appraisal to get a market value for the property to determine the amount they will accept on the loan.

That’s where I come in. The paperwork is still lengthy, but for the most part it will be me doing the leg work and getting things in order. I market the home just like a ‘regular’ listing using the value the mortgage gives me. I’ll need paperwork updated, bank statements and a whole lot of stuff…

If the property cannot be sold as a short sale, the last alternative is to do a ‘deed-in-lieu of foreclosure’. Which basically means signing the property back to the bank.

Why not just walk away and say to hell with it? You can do that, but it will take a very long time to build your credit up after a foreclosure if you ever see yourself buying another property.

Credit wise, look at it this way. The best thing to save your credit is to sell the house outright and close out the mortgage owing nothing. The second best thing for your credit is to sell the property as a short sale with no deficiency judgment. The third best thing for your credit is to do a ‘deed-in-lieu of foreclosure’.

The worst thing to do is sit on your hands and hope it all goes away or that you will win the lottery…  which may happen because I won $200 on a scratch off this past week!

Or I can make pie…  it’s up to you entirely…