The Obama administration’s $75 billion program to protect homeowners from foreclosure has been widely pronounced a disappointment, and some economists and real estate experts now contend it has done more harm than good.

Since President Obama announced the program in February, it has lowered mortgage payments on a trial basis for hundreds of thousands of people but has largely failed to provide permanent relief. Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes.

As a result, desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.

Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system.

“The choice we appear to be making is trying to modify our way out of this, which has the effect of lengthening the crisis,” said Kevin Katari, managing member of Watershed Asset Management, a San Francisco-based hedge fund. “We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway.”

Mr. Katari contends that banks have been using temporary loan modifications under the Obama plan as justification to avoid an honest accounting of the mortgage losses still on their books. Only after banks are forced to acknowledge losses and the real estate market absorbs a now pent-up surge of foreclosed properties will housing prices drop to levels at which enough Americans can afford to buy, he argues.

“Then the carpenters can go back to work,” Mr. Katari said. “The roofers can go back to work, and we start building housing again. If this drips out over the next few years, that whole sector of the economy isn’t going to recover.”

The Treasury Department publicly maintains that its program is on track. “The program is meeting its intended goal of providing immediate relief to homeowners across the country,” a department spokeswoman, Meg Reilly, wrote in an e-mail message.

But behind the scenes, Treasury officials appear to have concluded that growing numbers of delinquent borrowers simply lack enough income to afford their homes and must be eased out.

In late November, with scant public disclosure, the Treasury Department started the Foreclosure Alternatives Program, through which it will encourage arrangements that result in distressed borrowers surrendering their homes. The program will pay incentives to mortgage companies that allow homeowners to sell properties for less than they owe on their mortgages — short sales, in real estate parlance. The government will also pay incentives to mortgage companies that allow delinquent borrowers to hand over their deeds in lieu of foreclosing.

Ms. Reilly, the Treasury spokeswoman, said the foreclosure alternatives program did not represent a new policy. “We have said from the start that modifications will not be the solution for all homeowners and will not solve the housing crisis alone,” Ms. Reilly said by e-mail. “This has always been a multi-pronged effort.”

Whatever the merits of its plans, the administration has clearly failed to reverse the foreclosure crisis.

In 2008, more than 1.7 million homes were “lost” through foreclosures, short sales or deeds in lieu of foreclosure, according to Moody’s Economy.com. Last year, more than two million homes were lost, and Economy.com expects that this year’s number will swell to 2.4 million.

“I don’t think there’s any way for Treasury to tweak their plan, or to cajole, pressure or entice servicers to do more to address the crisis,” said Mark Zandi, chief economist at Moody’s Economy.com. “For some folks, it is doing more harm than good, because ultimately, at the end of the day, they are going back into the foreclosure morass.”

Mr. Zandi argues that the administration needs a new initiative that attacks a primary source of foreclosures: the roughly 15 million American homeowners who are underwater, meaning they owe the bank more than their home is worth.

Increasingly, such borrowers are inclined to walk away and accept foreclosure, rather than continuing to make payments on properties in which they own no equity.  A paper by researchers at the Amherst Securities Group suggests that being underwater “is a far more important predictor of defaults than unemployment.”

From its inception, the Obama plan has drawn criticism for failing to compel banks to write down the size of outstanding mortgage balances, which would restore equity for underwater borrowers, giving them greater incentive to make payments. A vast majority of modifications merely decrease monthly payments by lowering the interest rate.

Mr. Zandi proposes that the Treasury Department push banks to write down some loan balances by reimbursing the companies for their losses. He pointedly rejects the notion that government ought to get out of the way and let foreclosures work their way through the market, saying that course risks a surge of foreclosures and declining house prices that could pull the economy back into recession.

“We want to overwhelm this problem,” he said. “If we do go back into recession, it will be very difficult to get out.”

Under the current program, the government provides cash incentives to mortgage companies that lower monthly payments for borrowers facing hardships. The Treasury Department set a goal of three to four million permanent loan modifications by 2012.

“That’s overly optimistic at this stage,” said Richard H. Neiman, the superintendent of banks for New York State and an appointee to the Congressional Oversight Panel, a body created to keep tabs on taxpayer bailout funds. “There’s a great deal of frustration and disappointment.”

As of mid-December, some 759,000 homeowners had received loan modifications on a trial basis typically lasting three to five months. But only about 31,000 had received permanent modifications — a step that requires borrowers to make timely trial payments and submit paperwork verifying their financial situation.

The government has pressured mortgage companies to move faster. Still, it argues that trial modifications are themselves a considerable help.

“Almost three-quarters of a million Americans now are benefiting from modification programs that reduce their monthly payments dramatically, on average $550 a month,” Treasury Secretary Timothy F. Geithner said last month at a hearing before the Congressional Oversight Panel. “That is a meaningful amount of support.”

But mortgage experts and lawyers who represent borrowers facing foreclosure argue that recipients of trial loan modifications often wind up worse off.

In Lakeland, Fla., Jaimie S. Smith, 29, called her mortgage company, then Washington Mutual, in October 2008, when she realized she would get a smaller bonus from her employer, a furniture company, threatening her ability to continue the $1,250 monthly mortgage payments on her three-bedroom house.

In April, Chase, which had taken over Washington Mutual, lowered her payment to $1,033.62 in a trial that was supposed to last three months.

Ms. Smith made all three payments on time and submitted required documents, Chase confirms. She called the bank almost weekly to inquire about a permanent loan modification. Each time, she says, Chase told her to continue making trial payments and await word on a permanent modification.

Then, in October, a startling legal notice arrived
in the mail: Chase had foreclosed on her house and sold it at auction for $100. (The purchaser? Chase.)

“I cried,” she said. “I was hysterical. I bawled my eyes out.”

Later that week came another letter from Chase: “Congratulations on qualifying for a Making Home Affordable loan modification!”

When Ms. Smith frantically called the bank to try to overturn the sale, she was told that the house was no longer hers. Chase would not tell her how long she could remain there, she says. She feared the sheriff would show up at her door with eviction papers, or that she would return home to find her belongings piled on the curb. So Ms. Smith anxiously set about looking for a new place to live.

She had been planning to continue an online graduate school program in supply chain management, and she had about $4,000 in borrowed funds to pay tuition. She scrapped her studies and used the money to pay the security deposit and first month’s rent on an apartment.

Later, she hired a lawyer, who is seeking compensation from Chase. A judge later vacated the sale. Chase is still offering to make her loan modification permanent, but Ms. Smith has already moved out and is conflicted about what to do.

“I could have just walked away,” said Ms. Smith. “If they had said, ‘We can’t work with you,’ I’d have said: ‘What are my options? Short sale?’ None of this would have happened. God knows, I never would have wanted to go through this. I’d still be in grad school. I would not have paid all that money to them. I could have saved that money.”

A Chase spokeswoman, Christine Holevas, confirmed that the bank mistakenly foreclosed on Ms. Smith’s house and sold it at the same time it was extending the loan modification offer.

“There was a systems glitch,” Ms. Holevas said. “We are sorry that an error happened. We’re trying very hard to do what we can to keep folks in their homes. We are dealing with many, many individuals.”

Many borrowers complain they were told by mortgage companies their credit would not be damaged by accepting a loan modification, only to discover otherwise.

In a telephone conference with reporters, Jack Schakett, Bank of America’s credit loss mitigation executive, confirmed that even borrowers who were current before agreeing to loan modifications and who then made timely payments were reported to credit rating agencies as making only partial payments.

The biggest source of concern remains the growing numbers of underwater borrowers — now about one-third of all American homeowners with mortgages, according to Economy.com. The Obama administration clearly grasped the threat as it created its program, yet opted not to focus on writing down loan balances.

“This is a conscious choice we made, not to start with principal reduction,” Mr. Geithner told the Congressional Oversight Panel. “We thought it would be dramatically more expensive for the American taxpayer, harder to justify, create much greater risk of unfairness.”

Mr. Geithner’s explanation did not satisfy the panel’s chairwoman, Elizabeth Warren.

“Are we creating a program in which we’re talking about potentially spending $75 billion to try to modify people into mortgages that will reduce the number of foreclosures in the short term, but just kick the can down the road?” she asked, raising the prospect “that we’ll be looking at an economy with elevated mortgage foreclosures not just for a year or two, but for many years. How do you deal with that problem, Mr. Secretary?”

A good question, Mr. Geithner conceded.  “What to do about it,” he said. “That’s a hard thing.”

The Federal Housing Administration has pushed back to Feb. 15 implementation of new rules for appraisals that were originally scheduled to take effect on Jan. 1, in order to give FHA and lenders more time to adjust systems to accommodate the changes.

The new rules are intended to bring FHA appraisal policies into “full alignment” with rules employed by Fannie Mae and Freddie Mac since May 1 to protect appraisers from coercion, the Department of Housing and Urban Development (HUD) said in announcing the changes in September.

Real estate industry groups have complained that the new rules governing appraisals for Fannie and Freddie, the Home Valuation Code of Conduct, have derailed sales because they have shifted work to appraisal management companies, some of which have allegedly employed inexperienced appraisers.

FHA’s new appraisal guidelines may not have the same effect, because they include “geographic competency” requirements for appraisers, and allow lenders to pay separate, market-based fees to both appraisers and appraisal management companies.

In a bulletin e-mailed to lenders Tuesday, HUD said implementation of two “mortgagee letters” governing appraisals, ML 2009-28 and ML 2009-51, has been pushed back to Feb. 15.

Regulators say they continue to expect that lenders will begin using new loan disclosure forms on Jan. 1, in order to comply with new Real Estate Settlement Procedures Act (RESPA) rules.

HUD has promised to “exercise restraint” in enforcing RESPA rule changes during the first four months of 2010 for those who can demonstrate they are making “a good faith effort” to comply.

That does not mean it’s OK to continue using the old good faith estimate (GFE) and HUD-1 settlement statement forms, Federal Housing Commissioner David Stevens said in a Dec. 17 letter.

“The idea that lenders, brokers and closing agents can delay implementing the new Good Faith Estimate and HUD-1 Settlement Statement beyond Jan. 1, 2010, is incorrect,” Stevens said. “After Jan. 1, the only circumstance where the old HUD-1 form can be used is when the most recent GFE the borrower received was issued in 2009 on an old form. There should be no confusion about when the mortgage industry must begin using the new forms.”

The new GFE and HUD-1 forms, and other information on implementation of the new RESPA rules, are available from HUD on a dedicated RESPA page.

Stevens also said it will probably be the end of January before HUD puts forward a formal proposal for implementing tightened underwriting standards on FHA-backed loans, as outlined by Housing Secretary Shaun Donovan on Dec. 2.

Donovan told lawmakers that with FHA’s capital reserve ratio having fallen below a 2 percent statutory minimum established by Congress, HUD plans to increase the amount of upfront cash homebuyers must bring to the table, raise minimum FICO scores for new borrowers, and reduce maximum seller concessions from 6 percent to 3 percent.

Donovan also said HUD is considering raising FHA mortgage insurance premiums. HUD has the authority to raise upfront premiums from the current 1.75 percent to as much as 3 percent, but would need approval from Congress to raise annual premiums for new borrowers beyond the current level of 0.5 percent.

HUD typically provides at least 60 days’ advance notice after issuing formal notice of a policy change, so if a proposal is put forward at the end of January, it might not take effect until April.

Stevens said he could not comment on when FHA will actually implement the planned tightening of underwriting standards “until decisions have been reached on new policies or policy changes and the manner in which they will be introduced. However, as part of our process of exploring policy options, we will reach out to many industry players to better understand operational impacts in order to best assess a fair implementation time line.”

Ginny, can you please explain why the Federal Housing Administration (FHA) will not allow a buyer to purchase a home that was sold within the previous 90 days? We have asked this question numerous times and everyone just goes around it and says FHA will not allow this type of loan.

We have seen several properties that we really want, but we keep being rejected because we have to go FHA (we have only a 3.5 percent downpayment). Why is this a rule? Are there any ways to work around it?  Joy B., Beaumont, Tx

Joy, the only thing you can do to work around this issue is to restrict your house hunt to homes near or past the 90-day time frame. You must close your purchase or escrow at least 90 days following the closing of the previous purchase — and honestly, many sellers will simply prioritize offers from wannabe buyers using conventional (i.e., non-FHA) financing.

Let’s get clear on what this rule is and why it exists. FHA doesn’t actually offer loans; it simply insures loans made by mortgage lenders against the risk of default. That just means that if you default, FHA agrees to cover the lender’s losses, so long as the lender ensures that you, your loan and your transaction meet a set of guidelines.

FHA’s aim is to ensure that mortgage loans stay available to borrowers who otherwise wouldn’t be able to qualify for a home loan.

Right now, the lowest “conventional loan” downpayment requirement is around 10 percent. By insuring loans with downpayments as low as 3.5 percent, FHA allows you and people in your situation to buy when they would be blocked from participating in the market otherwise.

But here’s the deal: FHA’s position is that a large number of homes that were walked away from and/or foreclosed on during this recent housing crisis were homes that had been flipped, or bought and resold very quickly at a dramatically higher price for profit.

From the FHA’s perspective, the flipping phenomenon was partially to blame for the runaway appreciation in home prices and, when values dropped, the owners who had paid these inflated values were simply much more likely to abandon their homes or otherwise lose them through foreclosure.

My dad taught me as a child the following adage: “She who has the cash makes the rules.” And so it is with FHA loans. FHA wants to discourage flipping, especially flips in which little or no work has been done to improve the condition of the property, so it refuses to insure loans that fund flip resales.

For this reason, in 2008 the FHA enacted the following anti-flipping rule, which is the very rule you seem to be running up against:

Resales occurring within 90 days of the acquisition will not be eligible for a mortgage to be insured by FHA. FHA’s analysis disclosed that among the most egregious examples of predatory lending was on “flips” that occurred within a very brief time span, often within days. Thus, the “quick flips” will be eliminated.

Now, if you should find and get into contract to purchase a property that is past the 90-day threshold, you might be able to obtain an FHA-insured loan, but you will have to get a second appraisal — at your expense — and ideally the seller will be able to document that the seller made significant investments and improvements to the property since purchasing the property.

More from the FHA rule: Resales occurring between 91 and 180 days will be eligible provided that the lender obtains an additional appraisal from an independent appraiser based on a resale percentage threshold established by FHA.

This threshold would be relatively high so as to not adversely affect legitimate rehabilitation efforts but still deter unscrupulous sellers, lenders, and appraisers from attempting to flip properties and defraud homebuyers. Lenders may also prove that the increased value is the result of rehabilitation of the property.

But this is Home Sale Hindsight — what went wrong in your house hunt? It was your advisers’ failure to explain the rationale and details of this rule. Had they done so, you might have focused your efforts not on questioning the rule and looking for workarounds, but on finding that needle-in-the-haystack property that meets both your needs and FHA guidelines.

With the nationwide unemployment rate climbing above 10 percent, could 2010 see even more declines in real estate prices?

One of the most important influences on housing prices is the employment rate. When employment is high, people are more likely to purchase. In such an environment, there is optimism that if you lose your job, you will be able to find a new one.

Today, we’re facing some of the highest unemployment rates since the Great Depression. Is it possible that the housing market can make a recovery in light of these conditions? Here are several key factors to determine what is most likely to happen in your market.

1. Markets aren’t just local, they’re “hyperlocal”
Prices may be down in your state, county or city, but up in your local area. For example, it’s common for the first-time-buyer market to have shortages of inventory while the remainder of the market is glutted with inventory.

To determine what will happen in your local market, you must consider the “hyperlocal” or “micro” market conditions. In most cases, this means what is happening within a one-mile radius of where the property is located. It also means considering only those properties that have square footage and lot sizes within approximately 10 percent of your property’s square footage and lot size.

2. Months of inventory on the market are the best predictor of price changes
Even though the National Association of Realtors (NAR) is forecasting that existing-home sales will jump 10.8 percent in 2010 after a 4.8 percent increase in 2009, the real issue is how much inventory is on the market in your local area.

During the 30-plus years I have been in the business, I have found the amount of inventory in a given location and price range to be the best predictor of what prices will do several months from now.

As a rule of thumb, price changes lag behind inventory changes by about six to 10 months. If there are only two or three months of inventory in your market, chances are good that prices will be increasing in 2010. On the other hand, if there are eight or more months of inventory, your area may experience price declines well into 2010.

3. Extension of the first-time-buyer tax credit
While many people feel the first-time-buyer tax credit was responsible for the upswing in sales activity this fall, NAR reports that only 6 percent of the buyers attributed their decision to purchase this fall to the tax credit.

There are two key issues for 2010. First, will the extension of the tax credit produce enough buyers to create a price increase? Second, what will happen to the market when the credit runs out? Will sales drop as substantially as they did when the Cash for Clunkers car-buying program ended? Will NAR try for another extension even though the Obama administration has signaled that “this is the last time we’re going to be caving to the demands of NAR.”

4. Demographics bode well for increased sales activity
Gen Y (born 1977-94) is now at their peak time for buying their first home. There are now more Gen Yers than there are baby boomers (born 1946-64). This huge cohort of young adults is marrying and having children.

In fact, the typical married Gen Y mom has 2.3 kids. Owning a home is part of their American dream. Although the unemployment rate is even higher among this group, most still have jobs. Coupled with the first-time-buyer tax credit, this could be a strong force to drive prices upward.

5. The real issue: cost of ownership, not sales price
The real driver of prices in 2010 will continue to be the cost of homeownership. This is a huge wild card for a variety of reasons. If interest rates increase from 5 percent to 7 percent, or even from 5 percent to 6 percent, the impact on monthly payments would take would-be buyers off the market.

And changes of this magnitude could take place as early as 2010. The reason? Interest in the sale of U.S. Treasurys that are used to finance our debt is weak. This means that the government could raise interest rates to attract more buyers. The other issue is the decline in value of the U.S. dollar, which, in turn, can result in inflation. The Federal Reserve typically responds by raising interest rates to cool inflationary pressures.

The third factor that could drive up the cost of homeownership is the decline in tax revenues at the local and state levels. This could result in increased property taxes in some areas. Increased costs shrink the pool of potential buyers resulting in fewer sales and potentially a decline in prices.

Bottom line: Watch the sales levels and the inventory in your local area. If sales are increasing and inventory is decreasing, look for stabilization of prices first and then, eventually, an increase. On the other hand, if the inventory is static or increasing, 2010 will probably be as tough as 2009.

Two years ago, almost no one would have thought that Federal Housing Administration-insured loans would become one of the most important sources of financing for real estate sales. Recent changes in FHA guidelines may make an FHA-insured loan a great choice for your purchase.

FHA dates back to the National Housing Act of 1934. As part of that legislation, the 30-year fixed mortgage came into being. FHA has served as an important resource for buyers for 70-plus years, and its loan programs often allowed people to purchase with little or no money down.

I remember doing my first FHA deal back in the 1970s. The property was priced at $62,000. In order for the transaction to close, the seller had to pay two points for the buyer ($1,240) plus all the normal closing costs (about 8 percent, part of which included commissions, the title policy, and the proration of taxes, interest and insurance).

In addition, FHA sent out an appraiser who could require additional repairs be made to the property. The repairs were often things that neither the seller nor the buyer considered to be important.

In my transaction, FHA required the seller to repair some minor cracking in the driveway plus a number of picky repairs that cost more than $500. As a result, it cost the seller about 11 percent of the sales price ($6,800) to close the deal or an extra $1,860. These hefty requirements made most sellers reluctant to accept an FHA transaction. If the prices were increasing, a typical ploy was to add the additional seller fees to the purchase price and hope that the appraisal came in high enough to close the deal.

With the advent of the subprime crisis, lending resources dried up. FHA was not a major player then due to the low loan limits. As a result, borrowers had to rely on loans that would meet either the Fannie Mae or Freddie Mac requirements. These requirements included a maximum loan amount of $417,000 (or as high as $729,750 in some high-cost areas) as well as certain credit score minimums and loan ratios.

The following changes have made FHA an important resource for today’s condo buyer.

1. Larger loan limits
The Housing and Economic Recovery Act of 2008 and Economic Stimulus Act of 2008 established higher loan limits — the loan limit for FHA mortgage insurance for single-family, one-unit properties now ranges up to a cap of 175 percent of the GSE limit of $417,000, for some areas.

2. Condominiums no longer funded separately from single-family residences
The challenge for condominium owners seeking FHA financing has been that FHA segregated single-family residence loans from condominium loans. A recent change to the FHA guidelines will no longer segregate owners of condominiums from those who own single-family residences. This means these loans will be easier to sell on the secondary market.

3. Relaxation of attorney review requirements
A major challenge with the old FHA rules was that buildings with 100 units or less had to hire an attorney to review the condominium documents. The attorney would have to certify that the documents met the 37-page legal standard. Even if you could find an attorney do this work, it could cost $1,000 or more. The issue for the buyer and seller: Who is responsible for bearing this additional cost?

4. Relaxed presales requirement for new projects
For years, one of the greatest hurdles facing any condominium development was meeting the “50 percent rule.” I remember selling properties in new condominium buildings and being unable to obtain financing until 50 percent of the condominiums in the building had sold to parties other than the developer. If the building was very popular, meeting the 50 percent was no issue. Even then, many lenders would refuse to fund more than 25 to 50 percent of the units in a single building. This sometimes left the developer hustling to find two lenders to fund the initial sales in the building.

Given the slow rate of sales in many buildings today, a buyer in a new project could wait months or even years to meet this requirement. The new FHA guidelines reduce the presales requirement from 50 percent to 30 percent. They do, however, continue to limit the number of FHA loans in any building to 30 percent.

These changes mean it will be easier than ever before to purchase a condominium using FHA. Check with a mortgage professional to determine whether FHA is a good option for your purchase.

Dear Ginny:  We need $237,900 to pay off our first mortgage and to cover closing costs. We have an offer from some buyers who qualify for a total purchase price of $233,000. We have to move because of my job change. We have the money for the downpayment on our next house. If we take this offer we will have to use part of our downpayment money to close the deal. That will probably put us short on our next house. Our agent says we should be thankful we have a preapproved buyer who can actually close the deal. Do you have any suggestions? –John W.. Dear John: First, if you have a preapproved buyer who can definitely close the transaction, it would be very smart to take the offer, even if it’s $4,900 less than what you need to pay off the loans and closing costs. There has been quite a bit of commentary in the press about a new wave of foreclosure properties entering the market in 2010. This could be well over a million properties. A flood of new inventory would have the effect of lowering prices even further. The other concern is that our government is having trouble selling Treasurys. The lack of demand will probably force the government to raise the rate of return to attract buyers for our debt. When these costs increase, buyers experience them as an increase in the interest rates. When rates go up, the number of buyers who can afford your home decreases. Thus, you could be facing the double whammy of more foreclosure properties competing with your property, plus a reduced buyer pool if interest rates increase. When you are ready to purchase your next home, an increase in inventory means that you may be able to get a much better home at a lesser price. Even if interest rates increase, however, many people will lower their price to move their property. Given that you have money in the bank and enough to purchase another property, a short sale where the lender takes a reduction in their payoff amount is probably not a viable option for you in terms of bridging this gap. Here are some other alternatives to consider. 1. Is the buyer going for a fixed-rate or an adjustable-rate mortgage? If the buyers’ lender qualified the buyers for a fixed-rate mortgage and the buyers really want your house, perhaps they would be willing to apply for an adjustable-rate mortgage? This can be a great solution for someone who is just starting out and who doesn’t plan to be in the property for 30 years. 2. Does the buyers’ lender offer a buydown program? Many lenders offer buydown programs to help borrowers qualify as well. The most common buydown is known as “2-1.” Assume that the rates are at 6 percent. A typical buydown would be 4 percent for year one and then 5 percent for year two. At the beginning of the third year through year 30, the rate would go back to 6 percent. At closing, the borrower or the seller prepays the difference in interest for the first two years. For example, if your purchaser is obtaining a loan of $200,000, the buydown amount would be two percentage points, or $4,000, the first year, and $2,000 the second year, for a total of $6,000. The $6,000 may be added to the purchase price, provided the comparable sales are high enough to support the higher valuation. The buyers would qualify at the 4 percent interest rate, which would allow them to obtain a larger loan. You could use this same strategy on your purchase. 3. Can the buyers qualify for more by obtaining an equity loan? Several years ago I had a situation where the lender was extremely picky about borrowers’ credit ratios. The clients had a new car that was being paid off over five years. The way the lender suggested that they solve the problem was to take out an equity loan from their credit union as part of the purchase and pay off the car. (The borrowers were putting 20 percent down.) This lowered their debt ratios and allowed them to qualify for a larger loan. 4. Would the buyer be interested in any of your furniture, appliances, big-screen television, or other decorating items? Furnishing a house can be an expensive proposition, especially for first-time buyers who are often stretching to purchase. For example, you may have a washer, dryer or refrigerator that is in good condition that you could include in the purchase. You could arrange to sell these items outside the real estate transaction to account for all or part of the difference. (Please note that personal property items generally require a bill of sale. Check your local city, county and state Web sites for the rules regarding the sale of personal property.) 5. Share the pain I’ve never been a fan of cutting commissions. Unless your agent is the supervising broker, the agent cannot agree to cut a commission, as the contract is between you and the agent’s company, not the individual agent. There is also a risk in pursuing this approach. The buyer’s agent may decide he doesn’t want to cooperate and takes his buyer elsewhere. Some supervising brokers will say, “Do whatever you want, but it’s coming out of your split, not ours.” In your case, if you split the difference three ways — between the buyer, you, and the two agents, the difference for each party is $1,633. No one is happy about having to come up with extra cash, but sometimes that’s better than starting over. Given the current environment, closing with this buyer may be the best bet. If I were in your position, I would do whatever I could to make this happen.