To avoid foreclosure and exit your mortgage, you have a couple of options. To decide which is better for your situation, a short sale vs. deed in lieu, learn the pros and cons of each option.
To avoid foreclosure and exit your mortgage, you have a couple of options. To decide which is better for your situation, a short sale vs. deed in lieu, learn the pros and cons of each option.
Short sales are a popular option for those looking for ways to avoid foreclosure. In a short sale, your mortgage lender allows you to sell your home for less than you owe on it because your real estate value has dropped since you purchased the house. Essentially, the lender is accepting some loss in order to avoid a foreclosure, which can be very costly for a bank. If you are interested in a short sale, you must submit a loss mitigation application to your lender. In addition, you will need to include:
- A financial statement
- Proof of monthly income
- Bank statements
- A hardship letter
- Recent tax returns
If you don't believe you can get an offer through a short sale, you may consider a Deed in Lieu (DIL) of foreclosure. In a DIL, you voluntarily allow the lender to take your home back without going through foreclosure. As with a short sale, you will have to submit an application along with a hardship letter and proof of income. In most situations, the lender will require you to try to sell your home for at least 90 days before considering your application for a deed in lieu.
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When you consider whether a short sale vs. deed in lieu is your best option, it's important to realize that each option has benefits. With a short sale, your lender will probably waive the deficiency balance, or the difference between the amount you owe and the closing sale price. A deed in lieu may be finalized much more quickly than a short sale and your lender will also probably waive the mortgage balance that is in default.
Both situations have disadvantages as well. A short sale requires you to go through the trouble of finding a buyer, which can take a great deal of time and effort. Although a deed in lieu may be quicker, it is not an easy process either. Additionally, when you compare a short sale vs. a deed in lieu, know that both have a negative affect on your credit history.
If you are facing foreclosure and comparing a short sale vs. deed in lieu, weigh the pros and cons before making a decision. You may need the advice of a professional real estate agent who specializes in short sales before you decide which option is best for your situation. To find an agent near you, go to Reply!