Short Sale vs. Deed in Lieu

A short sale and a deed in lieu of foreclosure may end up being the final result in a modification. What a short sale does is, it allows the home owner to sell the home for less then they owe to the bank they originally got a loan for to purchase the home. This has become more common as home values have declined as much as 60% in some areas across the nation. Generally the hardest part of the short sale is working with the lender to get them to accept the price offered by the buyer. Many factors come into this equation of what to sell the property for. One major factor is how much the comparable home sales in the area are going for. Due to a large volume of foreclosures being sold in almost every area, this has caused the selling price to go down. Another contributing factor is how large of a loan the current buyer can qualify for. Due to the economic and mortgage crisis, home loans have been hard to qualify for and this had added to a halt in new home purchases.

 

Usually the final step in avoiding a foreclosure is when the current lender has offered a deed in lieu of foreclosing on the home owner. This is the lender offering to forego the option of foreclosure assuming that certain terms are met when returning the property back to the lender. This option is far better than paying for a unaffordable mortgage and or getting a foreclosed on. As the market matures this option is becoming more popular with many clients looking for a modification. When the banks offer this to a client, they are generally looking out for the client’s best interest and understand that the client is in an unavoidable situation.