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If there is no equity in the house, you are stuck with a property that maybe nearly impossible to sell in today's market. And you can't sell it for a price that will sell quickly. You may even have more in loans than the house is worth. That is not unusual now. So one alternative is to find an investor who can put together a short sale package to convince the bank to take less than what is owed. Banks now have so many houses in trouble that they are willing to do this. This takes a lot of time, so start now. Often, you must submit three offers to the bank before they accept and this can take months so it is important to start as soon as you can.

One thing that you must be aware of is that after the bank agrees to the short sale, they will send you a 1099 for the difference. What I mean is, say you owe the bank $200,000 and the investor puts together a package that convinces the bank to sell the house to him for $150,000. The $50,000 difference is income to you since you no longer have to pay it. So the bank will send you a 1099 at the end of the year for that $50,000. And you will have to pay income taxes on that $50,000.

To do a short sell you will need the following in your short sell package that is sent to the lender