In a complicated market like todays, it is hard to know whether you should keep your home or walk away from it. Many homeowners have watched their property values drop over 25 percent, sometimes more. Some say the market hasn't even hit the bottom yet.

Some homeowners are beginning to wonder if staying in their home is even worth it anymore. Some wonder, "If I owe more on the mortgage than the house is worth, why throw good money after bad?" When homeowners are thinking of walking away, they need to remind themselves of why they purchased the home, when they did, in the first place. It could be the fact that is was and still is a great neighborhood, apart from the declining value. It also could be that it is close to a great school that your children still attend. Maybe the drive to work is a breeze from your home. The reasons could go on and on. Homeowners should also consider the following reasons to stay in their current homes: 

•·       If you sell now, you're basically selling at a loss. The loss in equity is not an actual loss unless you sell; property values are likely to come back up over time. 

•·       If you're having trouble making payments, this would be a great opportunity to lower your house payment through refinancing or a loan modification.

•·       Walking away and vacating your home can tarnish your credit and make it much more difficult and costly to purchase a home when the market does recover, which it will.

•·       More and more lenders are seeking deficiency judgments against homeowners in states in which deficiency judgments are allowed. In other words, if homeowners abandon the property and the lender can't sell it for enough to cover the remaining balance on the loan, the lender may pursue legal action to collect the difference.

•·       Lenders are increasingly unwilling to accept a short sale or deed in lieu of foreclosure for borrowers who can afford to make the payments.

As a borrower, you must justify your reasoning of why you are unable to stay in the house and why you are no longer able to afford it. If you are financially able to make the payments and stay in the house, but you do not see the point of making payments on a house that is only worth a fraction of what you owe, the lender is highly unlikely to accept a short sale or deed in lieu of foreclosure.

However, it sometimes makes sense for homeowners to flee the property, assuming all of the following apply:

•·       They owe way more on the property than it is worth.

•·       They flat out cannot afford the payments no matter how much they trim their budget in other areas and even if the lender is willing to modify their mortgage.

•·       They're way behind on payments and will never be able to catch up.

•·       Trying to do the right thing is putting them further and further in debt.

•·       The lender rejects their request for an affordable loan modification.

•·       They can't refinance into an affordable monthly payment.

•·       They have come to terms with the fact that they may lose this house.

•·       They have exhausted or dismissed all other options, including bankruptcy.

If these conditions apply to your clients' situation, they may need to walk away, but there are right ways and wrong ways to abandon a property. In the case of abandoning a home, your clients may want to consider the following options from best to worst:

•·       Short sale: List the house for sale. If they can't sell it for at least what they owe on it, offer to negotiate short sales with the lenders who hold liens against the property. Real estate agents are often the best qualified to assist homeowners with the short sale option.

•·       Deed in lieu of foreclosure: If short sales are not an option, your clients can offer their lender a deed in lieu of foreclosure. They sign the deed over to the lender, hand them or ship them the keys, and walk away debt free. If your clients decide to pursue this option, advise them to hire an attorney to review any documents before they sign them. Also, let your clients know they may be able to negotiate with the lender to obtain some cash from the lender for turning in the keys and leaving the premises "broom clean." Or, the lender may allow them to live in the home rent-free until it sells - a vacant home is harder to sell.

•·       Walk out: Once homeowners have exhausted all other options and the lender is being totally uncooperative or uncommunicative, sometimes all they can do is walk away. This really is an option of last resort. A short sale or deed in lieu of foreclosure damages your credit less than a foreclosure. With your help, your clients should be able to avoid this unpleasant choice.

Homeowners should fight to keep their homes and real estate professionals should help them as much as possible. Keeping our clients in their homes is not only the right thing to do, but it is good for the industry- it helps stabilize our neighborhoods and the housing market and keeps the American Dream of Homeownership alive. When homeowners find themselves fighting a losing battle, however, they shouldn't throw good money after bad. Sometimes a graceful exit is the only choice.