I'd like to relocate to be closer to family but my house is not worth what I owe. Can I just call the bank and do a short sale?

Short sales aren't easy or a sure thing. On one of the short sales we have, the bank took almost six weeks to reply and the two lenders still couldn't come to terms with what they would accept. They were still bickering by the time the buyer found another house. In the meantime we see every other non-short-sale-listing go into contract, usually within 30 days of listing.

Banks also aren't the most communicative people to work with. Many buyers and agents avoid them for this reason. If you can call your bank and have them agree to a short sale just like that, it's a good sign. Far more likely you will call and call and be redirected and call and redirected and….you get the picture. So if you think this is the best solution, start communication with the bank now and see if you can get in touch with someone who can really respond. You need a point of contact first and foremost. If you don't have contact with a decision-maker you can not sell the house for less than the payoff amount. If you have a first and a second mortgage it becomes doubly difficult.

Consider renting your house out if that is a financial option. If you can get 80% of your mortgage covered by rent it is better than paying it all while you're not living there and the credit issues that may arise to position yourself for a short sale. Or, postpone your relocation if possible, especially if you have the finances to keep your mortgage current.

A buyer brought up a question to me:

"We have to pay $100 extra a month for the insurance on our house loan. What is this? Is this true? Is there a way to avoid this?”

This is called mortgage insurance. If you have less than 20% cash down your lender may require mortgage insurance. After a history of regular payments it is possible to get the requirement dropped or you can refi. It is possible to obtain a loan without mortgage insurance, but you may pay a higher rate. Shop around a bit and make sure you read the fine print. Depending on the amount of your loan, by avoiding the mortgage insurance, your alternative may end up being a higher payment overall than your payment with mortgage insurance.