Short Sale

The first option is a short sale. A short sale is when you sell your home and your lender agrees to accept less than you owe on the balance of your loan. Generally speaking, your lender will only approve a short sale if you are behind on your mortgage payments or can show you will be unable to continue making your payments . In order to be approved for a short sale, you will have to provide your mortgage lender's loss mitigation team with documentation of your income and assets, so they can verify that you have a financial hardship and that you truly cannot afford the home. You will need work with Realtor who will list your home and may
also negotiate the short sale with your lender. It is a process to complete a short sale but with
greater outcome then a Foreclosure would be on your record.

Deed in Lieu of Foreclosure

The second option is a deed-in-lieu of foreclosure (DIL). In a deed in lieu of foreclosure, you give the property to your lender voluntarily, in exchange for the lender canceling the loan. The item transferred is the deed to the property. The lender promises not to initiate foreclosure proceedings or to terminate any foreclosure proceedings already underway. The lender may or may not agree to forgive any deficiency balance resulting from the sale of the property.

The key issue in a deed in lieu of foreclosure is whether the lender is willing to forgive the deficiency balance. Read your contract carefully, to see how the deficiency balance issue is handled. If the document is unclear, take it to an attorney with experience in property law. An attorney’s time is not cheap, but will be a bargain compared to signing an agreement you do not understand. Don’t leave yourself vulnerable to receiving the unpleasant surprise of a large, unexpected debt.

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Thank you
Christina