You might think twice before you walk away from your home. There is a little known problem which you might not be aware of. For example, a person buys a home and obtains a loan. Due to the terms of the morgage, the interest rate goes up and so does the monthly morgage payment. The borrower now has a payment they cannot make. The borrwer then walks away from their home and lets the bank foreclose.

Let’s say that a person borrowed $300,000 to buy a home. The bank then sells the home and nets $200,000. The person who borrowed the money from the bank will receive a 1099 stating that they have received income of $100,000 in which they have to pay taxes. Ouch! How long will it take to pay the taxes on $100,000? Verify this with your accountant.

What you should do if you are facing foreclosure is to immediately talk to your bank and see if you can work something out on your monthly payments. Perhaps you can rent your home until you can refinance. Check out what you can rent your home for and of course, be careful who you rent to. In short, do anything you can to avoid foreclosure.

Stay away from companies which offer to bail you out of foreclosure for a fee. There is nothing they can do that you can’t. In most cases, they demand an upfront fee of a $1,000 or more, and then you never hear from them again. These companies in most cases are scam operations and new foreclosure rescue companies are cropping up to prey on people at a low point in their lives.

Remember; always make all of your payments on time, credit cards, car payments, house payments, etc. This will keep your credit score high and it will make it easier to refinance.

John O’Dell is a real estate broker, a licensed civil engineer and general contractor.