A short sale may have credit or legal consequences and may result in taxable income to Seller. The Seller is advised to seek advice from an attorney, certified public accountant or other expert regarding such potential consequences of a short sale.

Below, BRIEFLY, are SIX basic alternatives to a short sale that all sellers should visit:

1) REFINANCE ~ Based on the tightening of qualifying criteria for loan applications, refinancing in today's market is becoming more and more difficult. A refinance loan is an entirely new loan on different terms. A borrower should not lightly re-finance a purchase-money loan, since the new loan will not be a purchase-money loan, and borrower may become exposed to personal liability for any “deficiency” owed under the refinanced loan. 

2) LENDER WORKOUT ~ There are many types of different lender workouts - you need to discuss your options with your lender(s).

HAMP (Home Affordable Modification Program) ~ provides eligible homeowners the opportunity to modify their mortgages to make them more affordable.

3) SELL & BRING CASH TO CLOSING ~ This is not feasible for many homeowners already in distress, but it is an option.

4) DEED-IN-LIEU ~ This is when a borrower turns over title to the lender, sparing the necessity of foreclosure proceedings. This requires a negotiation with the lender, or perhaps simultaneous negotiations with multiple lenders. The success and terms of this option depend on whether the loan or loans are purchase-money loans. Lenders often try to require the borrower to sign a promissory note in exchange for agreeing to accept the surrender, and are much less willing to accept a Deed-In-Lieu in declining markets. A purchase-money borrower has very little incentive to give such a note unless the lender does NOT request a promissory note.

5) FORECLOSURE ~ By definition, a "foreclosure" is a legal process by which a defaulted borrower is deprived of his/her interest in the morgaged property. If you default on the loan and make no arrangement such as a short-sale or surrender of your title deed, your lender will become entitled to conduct foreclosure proceedings against your property. Remember, the note and deed of trust that you gave to your lender in order to get the loan entitle the lender to foreclose the deed of trust and sell the property in foreclosure if you fail to pay the loan according to the terms stated in the note.

6) DO NOTHING OR WALK AWAY ~ A distressed borrower who “walks away” cannot qualify for a new home loan for at least three years and possibly not for five years, and if he surrenders his deed he cannot qualify for at least two years and possibly for as long as four years. But if he negotiates a short sale, he may qualify to purchase again after two years. Whether a borrower can qualify for a new home loan will also depend upon his overall credit situation when he applies for a new loan.