While the bank naturally wants its entire $300,000 back, they know they can't squeeze water from a stone. If you can't afford to make your monthly payments, the bank will have to face two options: accept a short sale or go ahead with a foreclosure.

A foreclosure means that the bank will repossess the home and try to sell it themselves. This is a risky option for the bank because foreclosures are time consuming, and often result in the bank taking a big financial loss.

In a short sale, while the lending company will not recoup all monies owed, they may be able to recover more of their money than if they went the foreclosure route.

Why would a seller want to do a short sale as opposed to a foreclosure? A short sale typically does less harm to a person's credit score than a foreclosure, which is second only to bankruptcies in terms of credit damage. Depending on the terms of your agreement with the bank, you could also walk away with the remaining debt forgiven, which essentially gives you a fresh start at life.

Your lending company holds all the power when it comes to a short sale. They decide whether they're willing to accept one in the first place, and what the terms of the sale must be. They determine the viability of a short sale based several things. First, they need to be convinced that you're not simply shirking your responsibilities, but are actually facing a hardship.

According to most banks, legitimate hardships include the death of your spouse, unemployment, illness, and divorce.

If you're interested in trying for a short sale, you need to consult a real estate agent or attorney who has experience with short sales. They can advise you on the documents and procedures involved. You'll usually need to supply the lender with two years' worth of income records, as well as pay stubs and bank statements. It's also a good idea to gather a list of all your income and expenses to demonstrate the severity of your financial distress.

Aside from the hard numbers, you will also need to write a letter detailing your situation, and how desperately you need the bank to forgive your debt. Experts recommend that this letter be brutally honest and heartfelt. If you're having trouble feeding your children, tell them. Even if you feel ashamed of your financial situation, you need to communicate with the bank. While a short sale is primarily a business decision for the bank, they will take your needs into consideration, and look more kindly upon a short sale if they see that you're truly struggling to make it.

A short sale is a lengthy process, taking between one and four months on average for the bank to approve a short sale offer. If the offer the buyer makes is lower than the bank is willing to accept, they will deny your request for a short sale, and proceed with a foreclosure.

If you have professionals to guide you, you may escape the dark cloud of foreclosure, and enter the slightly brighter skies of a short sale. Just be patient, honest, and have all your paperwork prepared well in advance.

Resource:Amerivest is a realty company based in southwest Florida, and specializes in Naples real estate. Search for Park Shore condos and view property listings by visiting us at NaplesGuru.com.

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