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3 foreclosure alternatives: their pluses and minuses

Most people will do everything they can to keep from losing their home to foreclosure, especially if they have no other place to live. But in some cases, no foreclosure alternative is available, and there are no procedural errors by the lender to get the filing dismissed. What is a homeowner to do then?

Though you may not be able to keep you home, options may exist to allow you to avoid the lengthy and stressful foreclosure process. Here are three possible alternatives:

1. Selling the house. If you can sell at a high enough price, you can pay off the loan balance, plus expenses. Also, having your home on the market might convince the bank to delay foreclosure proceedings.

2. Short sale. Even if you are underwater on your mortgage (i.e., you home is worth less than the balance on the loan), you may still be able to avoid foreclosure via short sale. The lender may be willing to forgive the remaining balance to avoid having to take over the property.

3. Deed in Lieu of Foreclosure. In this transaction, the homeowner transfers title to the home to the mortgage's servicers, in exchange for the cancellation of the remaining mortgage debt. This has the advantage of avoiding foreclosure, but causes the homeowner to lose any equity in the home, and the forgiven debt may trigger a sizeable income tax bill.

None of these options are likely to be ideal, but they can help homeowners save time, money and headaches. An attorney can explain these methods in more detail, and examine your case to help figure out the best option for you.

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