Facing foreclosure is never easy. Aside from the damage a foreclosure can do to your credit score and future, it could also mean losing your home and uprooting your family. Although there are some situations where a foreclosure could actually be the best of all available options, the two most commonly recommended alternative solutions are a deed in lieu of foreclosure, and a short sale.
These solutions are very different, but share the same goal: Securing a measure of financial relief for you and your family. At The Buchalter Law Group, our Brevard County foreclosure defense attorneys can help you decide on a solution.
Benefits to a Deed in Lieu of Foreclosure
Also called a mortgage release or a voluntary foreclosure, a deed in lieu of foreclosure essentially hands the deed to your property back to the bank. This can help you avoid personal liability for the amount remaining on your mortgage, and help the lender avoid the lengthy and costly foreclosure process while still securing their property. Depending on your circumstances, you may be eligible for a relocation incentive to move, or you could be allowed to continue leasing the home for a set period of time.
Some other benefits to a deed in lieu of foreclosure can include:
- Deeds in lieu cut your financial losses significantly, especially if you owe more than your home is actually worth.
- You can avoid the stress and stigma of the foreclosure process.
- You may get to walk away from the mortgage altogether.
Benefits to a Short Sale
On the other hand, a short sale can also provide you with many benefits when compared with foreclosure. By negotiating deftly with lenders, you may be able to sell your home for less than the outstanding mortgage amount. For example, if you borrowed $500,000 for your house, but then its valuation dropped to $400,000 by the time you became unable to pay your mortgage, your bank could decide to accept the sale of your house at $400k as payment in full. This is because of the old adage “a bird in the hand is worth two in the bush” – lenders know that it’s a better bet to take the minor loss and collaborate with a willing participant now than to wait for the full amount from a frustrated borrower.
A short sale can also provide the following benefits:
- You may be able to buy another home within a few years, rather than the five to seven years required after foreclosing.
- A short sale does not automatically ruin your credit score, and it will be reported as “Paid in Full for Less Than Agreed.”
- Short sales can save you up to $7500 on foreclosure costs.
- It can buy you additional time to stay in your house while you resolve the details of your sale.
Which Foreclosure Alternative Is Right for Me?
Ultimately, both a short sale and a deed in lieu of foreclosure can get you out of debt faster and with much less stress than a foreclosure. However, your unique circumstances will dictate which one is right for you. Although a short sale may sound appealing, you may not be able to convince the bank to accept the terms of your sale, or you could end up being asked to pay the difference in a 1099 issued by the lender. A deed in lieu may seem like the solution to your mortgage burden, but having any added complexity – like a second mortgage – could make the situation far more complicated than it needs to be.
If you need assistance determining which foreclosure alternative to pursue, don’t hesitate to contact The Buchalter Law Group. We have 35 years of experience helping clients to avoid major drains on their time, money, and credit, by offering comprehensive reviews of our clients’ financial situations.
Contact us today at (321) 320-6088 for a free case evaluation with our Brevard County foreclosure defense team.