Coping with a bursting housing bubble -- page 2

3. Stage the house.
Staging used to be reserved for mansions, but these days the practice of hiring an interior decorator or just someone with good taste and experience in what sells to put your house in the most marketable condition is a good idea for all price ranges. A simple consultation will cost $100 to $150 in most markets, says Lori Matzke, whose Minneapolis-based staging company, Center Stage Home Inc., has affiliates all over the country. If you want someone to do the actual work, then expect to pay at least $1,000.

5. Furnish it, at least minimally.
Home stager Matzke says if you've moved out, it pays to leave furniture behind -- a couch and coffee table in the living room, beds in the bedrooms -- because it gives people an idea of scale and cuts down on the echoes. The furniture doesn't have to be functional. Matzke recommends air mattresses on boxes, covered by bedspreads.

6. Become a landlord.
Renting can be a good option, even if you don't get quite enough rent to cover the mortgage payment. The key here is to live close enough to the property to keep an eye on it or arrange for someone else to do it. The trouble is that in markets where it's hard to sell because of a plant closing or something similar, it may also be difficult to find good tenants.

7. Buy down the mortgage.
If you have spare cash and believe that the market will turn around, refinance and buy down the interest rate as low as you can. That will cut your payment until a buyer comes along.

8. Seek forbearance.
Mortgage broker Benoun emphasizes that the lender doesn't want to take the house back because that way, he's guaranteed to lose a lot of money. So if things are getting really desperate, propose an alternative to your lender. The least painful all around is probably forbearance. That's when the lender approves a revised repayment plan for the borrower that may include a temporary reduction or suspension of monthly loan payments. This can buy you more time to sell.

9. Propose a short sale or short refinance.
Ask the bank to take less than what is owed because the value of the property has declined. You'll have to prove it with an appraisal and some persuasive sales of similar properties. Once it's approved, re-price the house and hope a buyer comes along quickly. Benoun urges anyone who goes this route to get the mortgage company to put in writing that the debt was satisfied and that your credit report will not reflect foreclosure, charge off or collection.

10. Cut your losses.
Sometimes foreclosure is the only way. Turning over the deed to the lender in lieu of foreclosure can be a slightly better option, but in either case you lose the house and your good credit rating. "Sometimes, that's the way it goes," Benoun says. "You don't want to drain yourself. You have to decide at what point walking away is the best alternative."

Jennie L. Phipps is a contributing editor based in Michigan.