Banking and Mortgage and Selling, Oh My

As everyone knows, the economy is not excellent at current, making selling a house more challenging (no one expects their house to depreciate by $10,000 in 2.5 years). We expect that we might be able to get right about what we owe (so much for our down payment and the extra money I've added to the principal every month, huh?). That sounds okay--breaking even, but then you have to add in the thousands in realty fees.

The agent I spoke with yesterday recommened a short sale. In this you take what you can get for the house, the bank accepts the lesser amount, writes off the difference, and you're done. Sort of. You do have to pay taxes on this as income and you get a bad mark on your credit report.

Rather than do the easy thing, Justin and I had decided to work out a payment schedule with the bank to pay off the difference with interest. I called the lender yesterday and the guy was somewhat sympathetic. He said he knew we were trying to do the right thing, but that they would still list it as a short sale, even after we paid it off--making it harder to get a good interest rate in the future, plus we'd be giving them the money we should be saving for a down payment. He said they will write off the difference--basically, just telling us to take the money and run.

I don't get it. One would think that they would want their money. We have perfect credit--always pay on time, always over pay. I would think we'd be as safe a risk as they come.

Now to decide what to list the house for and what to do about the bank.