Homeowners faced with foreclosure can avoid ruining their credit by selling their home before a final judgment is ordered.

In fact, lenders encourage homeowners to sell and get their equity out of a home rather than go through a long, complicated and expensive foreclosure proceeding. Beyond keeping a foreclosure off their credit record, homeowners are not likely to see great profits from such a sale.

Whether it's because of a divorce, death, major illness, job loss, poor spending habits or other financial calamity, losing a home through foreclosure is a humiliating experience. Lenders, who ask about foreclosures on every loan application, also frown on such blemishes on your credit history.

Loans become delinquent after the third missed payment, at which time lenders initiate foreclosure proceedings. But by then, most lenders will have sent several late notices to the borrower. When those payment reminders start coming in the mail, borrowers should tell their lender about their financial difficulties, said Joann Brown, vice president of residential real estate for Florida's Sun Banks.

"A lot of times people just won't call their lender and be upfront with them," she said. "We won't go into a long-term arrangement, but if they can make it {the loan} current within about three months, we can work out a payment plan."

Lenders consider past-due payments on a case-by-case basis. Unavoidable money troubles are looked upon more kindly than uncontrollable shopping frenzies. Lenders may allow borrowers to make partial payments or may refer them to a consumer credit counseling service that can help them settle all their debts in a timely fashion.

If borrowers can't make up the payments in three months, most lenders forward the delinquent accounts to a lawyer who does a title search to start foreclosure. During that process, which usually takes three to six months, homeowners still have time to sell their property and avoid foreclosure.

Some homeowners may want to try selling the property themselves by placing newspaper ads that emphasize their need to sell fast. Others may opt for help from a real estate agent who specializes in pre-foreclosures.

Homes with assumable mortgages are more marketable because buyers can take over the payments without qualifying.

Homeowners who choose to sell without help from an agent should make sure unscrupulous buyers don't take advantage of them. Strapped borrowers have unknowingly relinquished all rights and interests in their property to buyers who offer quick help. That happens when the buyer gets the seller to sign a quit claim deed, so the buyer can take possession of the home for a few back payments. Under those terms, the buyer would not be obligated to give the seller the equity in the home. The buyer also might not record the deed or take title to the property. That buyer could rent the property while foreclosure proceedings continue against the owner.

Mary Mayse, a real estate agent with ERA Preferred Properties in Orlando, recommended that sellers hire someone to represent their interests. For a fee, real estate lawyers and some agents will review documents. All discussions or agreements should include the lender.

"If they meet with the prospects in conjunction with the lender, they won't get in trouble and they won't tell a prospective buyer anything that's not true," banker Brown said.

Distressed borrowers should set a realistic asking price for their house, Mayse said.

"Someone who is being foreclosed on is not in a position to bargain," she said. "They can't be too picky. They need to be open to any and all offers."

Not every home that is about to be foreclosed upon is salable, Mayse said. Some borrowers may not have enough equity in their homes to cover closing costs, real estate fees and other expenses associated with motivated sales. Borrowers who have lived in a house three or four years usually have sufficient equity to cover those costs, she said.

Another factor that prevents the sale of some pre-foreclosure homes is the property's lack of appreciation. In most of those cases, the homeowner owes more on the house than recent appraisals say it is worth.

When homeowners get caught in those situations, foreclosure is almost unavoidable. After a series of legal maneuvers that takes about three months, a court hearing is set, during which a final judgment of foreclosure is usually ordered.

Within 20 days, a foreclosure sale is held. Anyone can bid on the property. Payment provisions vary.

Jere Daniels, a Winter Park, Fla., lawyer whose firm Turnbull, Abner and Daniels handles some foreclosure suits for Barnett Bank, said mortgage holders are the only bidders in 95 percent of foreclosure sales. That's because properties with the best buying incentives are usually taken off the market before a foreclosure becomes final.

If no one outbids the lender for the property, the mortgage holder becomes the owner. But the borrower still has another 10 days to come up with the judgment amount before the lender takes title to the property. After taking title, most lenders will list the home with a local real estate broker. Lenders also will make available a list of foreclosed properties in their inventory, along with descriptions, sizes and asking prices.

Some lenders are anxious to unload the homes and sell them at attractive prices. Others ask fair market prices.

Said Bonnie Odell, spokeswoman for the Federal National Mortgage Association, "You can get a good bargain, but you're not going to get a fire-sale price."