In order to try to cut their losses, banks are now offering some troubled homeowners up to $35,000 to sell their homes before they end up needing to forclose.

The purpose of this is to offer an incentive for homeowners who owe more on their home than it is currently worth and who are seriously delinquent on their payments to sell their homes in a short sale as opposed to waiting and ending up in forclosure.

In a short sales, a home is sold for less than what is still owed on the mortgage and the bank forgives the excess debt. Banks have been hesitant in approving these deals in the past -- as they take a loss on the home -- but in certain cases, it's become a much better proposition than letting the homeowner go into foreclosure.

This new approach by the banks has come as surprise to many homeowners, according to Elizabeth Weintraub, a Sacramento-area real estate agent who specializes in short sales.

"Initially, the homeowners are skeptical," she said. "The bank may have already turned down their request for a modification. Then, one day, they call and say, 'Let us give you some cash.'"

When Chase Mortgage (JPM, Fortune 500) told Angelique Pierce, that she would receive a check for $25,000 if she sold her house, she couldn't believe it.

"I got the offer in the mail," said the Rancho Cordova, Calif. resident. "I called my bank to ask if it was real."

After Pierce became disabled a few years prior and subsequently had to stop working, she fell behind on payments on both her first and second mortgages, valued at $250,000 and $50,000, respectively.

Now, she's trying to sell her three-bedroom ranch for just $95,000 -- almost half of the $179,000 she paid for it in late 2002.

From the bank's point of view, the offers make sense, according to Tom Kelly, a spokesman for Chase Mortgage, who refused to comment on Pierce or other individual cases. "The first choice is a modification but if that's impossible than a short sale is a faster, more efficient solution," he said.

For the banks, letting homes go into foreclosure has become increasingly difficult and expensive. Homeowners have learned to fight the banks on foreclosures, dragging out cases for years.

And as the cases continue, expenses grow. Homeowners not only stop paying their mortgages but they stop paying property taxes and conducting normal maintenance as well. Roofs, siding, plumbing and other parts of the home deteriorate and the property loses value. By the time banks actually take possession, they're out tens of thousands of dollars.

To learn about how to refinance your home, to avoid foreclosure or short sale, go to: http://californiamortgagedirect.com/education-refinace

For more information on what happens to banks when home go into foreclosure or are sold in short sale, please visit: http://homebuying.about.com/od/shortsale/f/Banks-Foreclosure-Short-Sale.htm