A Bayesian method to call indels from short-read sequence data in individuals and populations by realigning reads to candidate haplotypes that represent alternative sequence to the reference. The candidate haplotypes are formed by combining candidate indels and SNVs identified by the read mapper, while allowing for known sequence variants or candidates from other methods to be included. In our probabilistic realignment model we account for base-calling errors, mapping errors, and also, importantly, for increased sequencing error indel rates in long homopolymer runs.