This is my response to a question asking about programs for short sales and whether short sales were possible for investment property:

That program is called HAFA and is part of HAMP. That is: Home Affordable Foreclosure Alternatives act which is part of the Home Affordable Modification Program which was instituted with the agreement banks made to receive Tarp funds from the recovery program! Whew!

http://www.roaringforkproperty.com/foreclosure.html

Anyway, the program works really well for:

1. People who are upside down on their primary residence.

2. People who have had a legitimate financial hardship that has caused them to not be able to keep up with their payments.

Investment properties are tough to get approved, but you could always call the lender or apply for a Short Sale Approval. You can get this approval before you even list your property for sale. The lender will base their decision on two main things:

1. Whether they are convinced that you cannot afford to keep the property and whether it is imminent that it will lead to a foreclosure if they do not except a short sale and:

2. Whether that short sale or the foreclosure would be more costly to them.

It is really just a matter of whether the lender is convinced that they will have to foreclose and which alternative costs them the least.

A good article : http://www.businessweek.com/the_thread/hotproperty/archives/2007/03/the_new_exit_strategy_a_short_sale.html

My advice would be that if you can afford to keep up with the payments for another year or so then hold on to the properties. I think rental rates will start to come up within the next year, and home values will start to climb, very slowly, again in summer 2012. (Just a guess based on national inventory levels.) One other option if you just want to get out from under the place is a deed in lieu. Again the bank needs to be convinced that this is a property facing imminent foreclosure, and then there are times that they may just take a quit claim deed in return for a release from the debt.

If you are going to proceed with either course of action, make sure to let me know. I have specialized training in handling these and there are a lot of pitfalls to be avoided. Specifically, you want to make sure the bank not only releases the lien and the deed of trust(or mortgage) but also gives you a signed waiver of the deficiency so that they cannot go back after you for a judgment on the loss. The other fallout is the fact that the IRS will treat the portion of the debt that is forgiven as ordinary income unless it was on your primary residence. That can add up to a large tax bill for money you never even saw.

-Mike