If you are struggling to meet your mortgage payments, on the verge of defaulting and feel like you have no choice but to give up your house, you might want to consider a short sale — a deal in which a lender agrees to accept a discounted payoff for a sold property. This strategy does not allow you, the homeowner, to walk away from unpaid loans, but it helps you avoid foreclosure. Here is what to do if you think a short sale is for you:

Seek government assistance
Look at the Home Affordable Foreclosure Alternatives Program and see if you are eligible for a HAFA short sale. If you meet the criteria, HAFA will give you relocation assistance and pardon you from leftover mortgage payments if the proceeds from your home sale do not cover everything. If you are considering a short sale, a lender might ask for a hardship letter that outlines why you need the short sale. You, as the seller, cannot have any assets, or the lender could argue that you do have the means to pay off the mortgage.

Seek lender approval
To go forth with your short sale, your lender needs to agree that they will release your security interest in exchange for proceeds from your home sale. Be careful. Your lender agreeing to a short sale does not mean you won’t have to pay interest and penalties on top of the difference. Check to see if your lender can sue you for a deficiency or the remaining balance. If you have loans from different lenders, you need to get permission from both of them before you can continue with your short sale.

Get the market value of your house
You need to know how much your house is worth before you try to sell it. Get the value of your property through a market analysis that you do yourself or with the help of a real estate broker. Then, work with a real estate agent who has experience with short sales to get the house listed.

Have a buyer
A short sale is contingent on someone actually buying the house. Both you and your lender need to approve the purchase and price before the transaction can take place. Your lender will not approve you for a short sale if you do not have a buyer.

Figure out your finances
If you can, enlist the help of a real estate lawyer or tax attorney to see what you will be paying after you sell the house. Your credit report will not indicate that you resorted to a short sale, but it may show that you paid less than your original loan agreement. Be aware that a short sale may impact on your taxes. Make sure you allot enough time for the whole process, as it can be lengthy and involve extensive paperwork.