If you are at a point that you are no longer able to afford your home and you are looking at possible foreclosure it may be time to sell. What costs are involved in putting your home on the market? Should you use a realtor? If you pay off your loan early is there a penalty. How much time do you have before you have to get out? We will explore all these issues so you are better prepared to make a decision. One thing is for sure, avoiding foreclosure is always the best path. It may be difficult and somewhat costly but you will avoid many financial problems down the road if you make the right move now.

Before you even consider selling your home to avoid foreclosure, you should exhaust all avenues of research for other options. Everyone’s situation is different so you have to find the right fit for you. The Internet is a great place to start looking up information. Always remember whom you are getting your information and advice from. If you talk to a realtor, they may tell you what you want to hear to sign you up. The current housing market is sluggish and it is a buyer’s market. You have to be willing to look at lowering your expectations on the value of your home. If your financial situation is dire, you may have to set the price just high enough to pay off your loan and low enough to attract the buyers that are out there. There is a common misconception these days, spurred on by the media that no one is buying. That is simply not the case. Houses that were selling in ten days two years ago may take up to ninety days to sell now.

For your first step you need to start gathering information. Call your lender and get your exact payoff amount and any possible prepayment penalties. Go online and use a site like www.Zillow.com to get an idea of the last selling price of comparable homes in your neighborhood. If you can access Multiple Listing Services or MLS you can get a good idea of your approximate home value. The decision to use a realtor may be easy for some. If you don’t have the time to dedicate to running open houses or you are not familiar enough with real estate it may be the best decision. Realtors can also attract more buyers through their expansive networking capabilities. Once you have a general idea of your homes value, figure out if it makes sense to sell, keeping in mind the hidden costs that will come up. These might include, as mentioned, prepayment penalties and moving costs. The choice may be obvious or you may decide to cut corners and wait for a better market. It all depends on your personal situation.

Your second step, should you decide to go ahead with the sale, are some inexpensive improvements. Obviously if you are facing possible foreclosure due to financial issues, you can’t put a pool in or add a deck onto the patio. The inexpensive improvements you can make are planting flowers, power washing the home and driveway, painting (basic white), and repairing simple damage. If you have friends with particular skills like drywall experience and equipment, ask them for a couple of hours of time to fill in any holes. Get the carpets professionally cleaned or rent a steam cleaner and do it yourself. Even a minimal amount of improvement can increase the appeal of your home to buyers. Your realtor should be able to walk you through the house and being aware of your budget, tell you what is a priority. You need to remove your footprint from the home as much as possible. You can have some personal touches but you want to give lots of room for the buyers to imagine how they would personalize it.

The third and most important step is to communicate with your realtor about setting the price of your home. You need to make your realtor aware of your situation. If it is dire and you have to sell quickly you can consider options like holding an auction. This places the home in a more attractive light to buyers. They know they will likely get a good deal and you know that the free market will take care of getting you what your house is worth today. Often auctions draw more buyers than homes that are sold traditionally and you just may get more than you think. You set the minimum so you know you will have enough to cover your loan and additional costs. You can also opt to have a professional appraiser come in and perform a home inspection. Though this can cost around $300, it is likely to be the most realistic estimation of your home’s value. You should have a well-prepared fact sheet ready so you can hand them out. Fact sheets point out all the positives in the home before the auction and will hopefully get you a few more bucks.

There are a few other costs that sellers may fail to take into consideration. If you have lived in your home as your main dwelling for two years, you will not have to pay taxes on your profits. If you make more on your home than $500,000 and are a married couple that files jointly or $250,000 for singles or married filing separately you must pay taxes on that money. If you lose money on the sale of your home there is no deduction for that loss.

Homeowners who are facing foreclosure may not necessarily need to sell their home to stave off foreclosure. There is always the possibility of renting out your home but that definitely has its share of risk. As a landlord you are governed by the landlord/tenant’s laws of your state. You need to be well versed in your responsibilities and be prepared to hold up to them to avoid costly litigation. You give up most of the control over your home and you need an airtight contract with good deposits. Some people may find the landlord role daunting while others find really responsible tenants that are easy to work with. It all depends on how much time you have and how involved you want to be. There are private companies that you can hire to do the bulk of the work but at the end of the day you are still responsible for that mortgage being paid. Even if you don’t want to be a permanent landlord, renting could buy you enough time to let the housing market turn around so you can make more money off your investment.

Foreclosure is a scary thought that might make some homeowners turn tail and just walk away, but that is the worse thing you can do. You have options and until you get out there and try them you will never know. Contact your local HUD office and set an appointment with a housing counselor. Bring all your financial information and let an experienced counselor inform you of all your choices. They can look at all your information, assist you in setting a budget that allows you to stay in your home or come to the conclusion that you need to get out. There may be government programs to help you stay in the home, freeze your interest rate or buy you some time. There may be refinancing options through Freddie Mac or Fannie Mae, which have been expanded recently to deal with the sub-prime mortgage mess. Talk to your lender about programs they may offer to give you some time to work things out. If your financial crisis is temporary, tell them. They may give you a couple months without payment and then let you get caught up. You will never know until you ask and they can only say no, so then you move onto the next option. Remember no matter how hurried you may feel beware of foreclosure rescue operations. Most do not care if you can pay off your loan, they only care about the profit they can make off of your situation. If you do decide to take this route investigate them thoroughly on the web and through the Better Business Bureau. Hopefully you can avoid them all together and save yourself some likely headaches.

The bottom line is your home is one of the biggest investments you will ever make. Try everything you can to avoid foreclosure and make some money. The worst case scenario is that you sell your home, pay off your loan and walk away with no profit. This at least leaves your credit intact so you can buy another home down the road. You may even find a less expensive home at a really great price in this buyers market. Reach out for all the help you can find. This is too important to leave to chance especially when there is so much help out there for you.