Mike, Dennis just provided a great answer with lots of good information. I can tell you from my experience with short sales that just because the 1st is so far upside down that there is no value for the 2nd does not mean a short sale can't work. The 2nd will realize this and usually be willing to release the lien as fully satisfied (no deficiency judgment following you) for as little as $1000 in your case - need to make sure they agree to the full release before signing anything! The 1st will usually be willing to pay the 2nd $1000 if the offer still nets them more than if they foreclosed, as Dennis pointed out. This number is usually about 85% of CURRENT MARKET VALUE, which they will determine by Broker Price Opinion or appraisal - make sure to meet these people at your house and explain that you are trying to avoid foreclosure and point out all the problems with the house - explain that the value needs to be accurate! You might also offer them some coffee - my point is that social engineering can help make sure they do not overvalue your house. In order to do all this, almost all lenders will require that you list the house with a licensed agent, so take the info Dennis and I have provided and call a few agents and ask them about a short sale, if it sounds like they are explaining the things we have explained, then you might have found one who can help you. You will have to price aggressively. Best of luck to you Mike!