"It's not easy to come up with that kind of money when you don't have a job," said Merriweather, 29, who bought her home on Detroit's west side two years ago. "I was just like, 'Oh my God, I can't afford this house.' "

Merriweather hasn't made a mortgage payment since December. But instead of joining the 16,351 Detroiters whose properties were foreclosed on during the first quarter of the year, Merriweather began to work with her lender and agreed to sell her property in what's called a short sale. That's when the lender agrees to accept a lower price for a property than what the seller owes.

A short sale differs from a so-called upside-down sale, which happens when the homeowner is not at risk of foreclosure and must pay the difference between the purchase price and the principal owed at settlement.

Merriweather's situation illustrates the painful, yet simple math many homeowners face. She paid $140,000 for the house and owes roughly $127,000. The house is on the market for $125,000 and probably will sell for even less.

In a short sale, the buyer negotiates directly with the mortgage company through a real-estate agent. The lender typically requires an appraisal and proof of hardship before allowing a short sale.

Sellers lose all equity, but they walk away without a foreclosure to mar their credit rating. Late payments still will be reported.

What many short-sale sellers don't realize is that they face income-tax liabilities, too. Banks report the canceled debt as income for the seller to the Internal Revenue Service (though Congress is considering a bill that would amend the tax code to forgive the tax debt).

Real-estate agents said they're advising more sellers who've fallen behind on payments to look at short sales as a way to avoid foreclosure. And increasingly, banks are willing to work with them.

"The worst thing possible for a bank is to foreclose," said Eric Burgoon, group senior vice president of LaSalle Bank, based in Troy, Mich. Burgoon advises homeowners unable to pay their mortgage to contact the lender before missing a payment. Some may be able to refinance the mortgage at a lower interest rate or change the monthly payments.

"It's the last thing we want to do," he said. "It doesn't help the customer, and it's the worst thing for us."

Many expect the number of short sales to grow. Property values have tanked in some states' overcrowded real-estate markets as unemployment rates have soared, leaving owners unable to sell homes for what they owe.

The ranks of financially strapped homeowners also likely will increase as those with adjustable-rate mortgages find themselves unable to handle the higher monthly payments.

"I'm getting calls every day," said real-estate agent Venesha Harris of the Loft Warehouse in Royal Oak, Mich. Homeowners "ask, 'What can I do?' It's desperate times out there."