A short sale and a deed in Lieu of Foreclosure are the best options if you want to give your home up, but don’t want foreclosure. These options let you sell or leave your home without being liable for any deficiencies.
A short sale is where the lender allows you to sell your house, but for an amount “short” of the money you owe. There are some states where the lender can sue you even if the house is already foreclosed or if you have already sold the house just to get the deficiency. There will be a deficiency if the money you get from the sale is bigger than the amount you owe. The difference between the money you got from the sale and the money you owe is the deficiency. If you are in a state where the lender can sue you to recover the deficiency, the best option for you is to ask the lender to allow you to sell. You should put this agreement in writing. This agreement is called short sale.
Deed in lieu of foreclosure
On the other hand, deed in lieu of foreclosure is where you give your house to the lender so that your loan will be cancelled. The act of giving your house to the lender is the “deed.” With this agreement, the lender will not engage in any foreclosure proceedings or cancel any foreclosure proceedings. Don’t forget to put the agreement on writing if you want the lender to forego the deficiency after the sale of your house. Before your lender will agree to sign a deed in lieu of foreclosure, you may be required to put your house on the market and wait for an average of three months. Also, banks would want you to sell your own house instead of them.
To know, which of these options is best for your foreclosure situation, it is best to consult or hire a lawyer.