You have many options available to you! What you do not want to do is ignor the situtation. Start talking with your lender and a Realtor in the area. They can help provide you with your options. For information about avoiding foreclosure visit my website!... more
Sell the home and make sure that the purchase contract (if this is going to be a short sale) has a clause that the bank will not file a deficiency judgment against you after the sale of your home AND another clause stating that they will report your mortgage on your credit as paid in full along with a letter to back it up (sometimes the banks don't updated the bureau correctly) and go to the IRS website and fill out the proper forms of hardship so they don't charge you income taxes on the difference of the sale amount and your mortgage. If you do a deed in lieu, you will owe income taxes on the whole mortgage, it may be harder to plead a hardship with the IRS when they will see on record you had an offer to purchase your home and it will will report negatively on your credit report. You are saving time and money for the bank by doing a deed in lieu when you could just force them to foreclose on you which allows you to live in the home longer and save your money.
It sounds that you are afraid of the offer not going through and you want an easy way out, but this is a home investment that you made and although people may paint home ownership as a pretty picture, in some cases its not. My direct advice is to suck it up, take the deal (short sale or not), apply the simple techniques indicated above (and get an attorney to assist you!) and get this house behind you so that you can move on.
And think twice before you attempt to purchase your next home (which will be A LOT harder if you do a deed in lieu).