Wetphx,
If you can afford to make the mortgage payments you will not be able to do a short-sale. Talk to your lender, tax consultant and a real estate attorney for legal advice.

Hope everything works out,
Jes Sierra, B.Sc.
Realtor®

Hi Wetphx,
Firstly I need to tell you that you are not the only one in this position. There are millions of people facing this. My suggestion would be that if you can still afford the payments on the property you should try to stick it out. The banks will not be able to refinance because there is no equity in the property unfortunately.

There are several avenues available to you. First try to call your bank to see if they are willing to work with you. If the payments just become too much to handle you could try a deed in lieu of foreclosure....this is a process whereby the bank takes back the property and forgives the loan. If that does not work I would recommend doing a short sale which would affect your credit but nowhere near as bad as a foreclosure. Try to avoid foreclosure as much as possible.

Good luck. I wish I lived nearer so that I could help you in person. I feel for you. Hang in there. Hope this helps.

One last thought, if you decide to short sale your property, be sure to ask the agent how many short sales he/she has already done. Find one with experience to best serve you.