Trouble Directory
State Laws
Short Sales And Deeds In Lieu Of Foreclosure

Debt & Bankruptcy Sponsors

There has been a great deal of ambiguity surrounding the benefits and common meaning of a short sale, verses what it means when a homeowner agrees to release their interest in a property in lieu of having to go through the foreclosure and debt collection process. The goal of this article is to help you understand how both type of property transactions operate to either stall or terminate a foreclosure proceeding.
 

Deed In Lieu Of Foreclosure

 
More often then not, a deed in lieu of foreclosure is an actual legal instrument, usually in the form of a deed in which the homeowner agrees to convey to the lender all remaining legal interest to the subject property in exchange for a legal release from any all deficiencies and financial obligations relating to the property. The agreement between the lender and homeowner must be entered into voluntarily, in writing and in good faith.
 
A deed in lieu of foreclosure does not normally include a third-party purchaser waiting in the wings to purchase the property. Rather, it is usually between the first position lender and the defaulting homeowner.
 
There are however major benefits for both the homeowner and the lender to such an arrangement. For homeowners, there is no longer a threatening legal cloud over his or her personal ownership of the property, nor is there the further risk of liability associated with having defaulted on the mortgage.
 
Advantages to a lender include saving the time and legal expense of having to foreclose on the borrowers property. There is also the advantage of not getting caught in a long and protracted bankruptcy should the homeowner file for protection under the bankruptcy laws. Based on housing studies, in today’s recession a bankruptcy can tie up a residential property for many months if not years.
 

The Short Sale Process  – Different From Deed In Lieu of Foreclosure

 
With foreclosures reaching record levels, many sellers and buyers are considering entering into short sale property transactions. However, both buyers and sellers should be careful to consider the expense and suitability of short sale transactions before they begin the home search and negotiating process.
 
A short sale occurs when the sales price is not sufficient to meet the seller’s mortgage obligations. By using the short sale process, the lender can agree to accept a buyer’s offer and forgive the balance still owed by the seller. The lender gets paid, the buyer gets a great deal and the seller has the opportunity to save his or her credit and avoid the pain and anguish of going through home foreclosure
 
The major distinction between a deed in lieu of foreclosure and the transfer of real property through a short sale is that the latter involves an actual buyer and seller with the lender being in the position of having to either approve or not approve the sales transaction. If the lender agrees to the transaction, it almost always means the lender will lose the legal right to pursue a deficiency judgment against the defaulting homeowner.
 
Finally, remember that negotiating a short sale is never an easy process. Banks and mortgage companies will only permit a short sale if they know that they can make more money on the short sale then they would otherwise make on the foreclosure. For the lender it’s a matter of simple arithmetic rather then business ethics.
 
For more legal and financial information on short sales, deeds in lieu of foreclosure and the experts that can advise you of the process and options, get live expert advice from Trouble-Talk Live.
 
 
Debt & Bankruptcy Sponsors
Services To Consider
Locate a local
Credit Counselor:
   
 
Document Center
  

Affordable & Professional

Select a document type from the list below. Most documents are prepared within just 48 hours.

  Search Local Help & Info
What:  
Where:
  Browse by state
 » All Local Guides
 » Alabama
 » Alaska
 » Arizona
 » Arkansas
 » California
 » Colorado
 » Connecticut
 » DC
 » Delaware
 » Florida
 » Georgia
 » Hawaii
 » Idaho
 » Illinois
 » Indiana
 » Iowa
 » Kansas
 » Kentucky
 » Louisiana
 » Maine
 » Maryland
 » Massachusetts
 » Michigan
 » Minnesota
 » Mississippi
 » Missouri
 » Montana
 » Nebraska
 » Nevada
 » New Hampshire
 » New Jersey
 » New Mexico
 » New York
 » North Carolina
 » North Dakota
 » Ohio
 » Oklahoma
 » Oregon
 » Pennsylvania
 » Rhode Island
 » South Carolina
 » South Dakota
 » Tennessee
 » Texas
 » Utah
 » Vermont
 » Virginia
 » Washington
 » West Virginia
 » Wisconsin
 » Wyoming
Local Guides
 Consumer Rights
 Criminal Law
 Debt & Bankruptcy
 Employment
 Immigration
 Marriage & Family
 Personal Injury
 Probate & Estate
 Renting & Housing
 Small Business
 Tax
 Personal Troubles
In partnership with JustGive.org, GotTrouble facilitates charitable contributions to nonprofit organizations that can serve a positive social interest while being innovative in their organizations practices. Many of these organizations provide support in education, career training and financial opportunity to millions of people in need every year.