A short sale and a deed in lieu are two common alternatives to foreclosure. Depending on a person’s circumstances and objectives, one option may be better than the other. Below is a description of both options and a comparison of the pros and cons of both short sale and deed in lieu of foreclosure.
Short Sale | Real Estate Short Sale
A short sale is a term used to describe the sale of a property for less than the amount that is owed on that property due to market conditions. The idea is for the lender to forgive the “deficiency” or amount that is owed on the property above what the property is worth. Factors that will determine the willingness of a lender to approve a short sale and forgive a remaining debt include the borrowers financial circumstances and the overall housing market in the area in which the home is located. Generally, short sales are preferred by most lenders to any other type of foreclosure avoidance program because they get the lender a quick resolution
Deed in Lieu of Foreclosure
Deed in lieu of foreclosure refers to the practice of signing over the deed to a property to the lender voluntarily instead of the lender having to go to the trouble (and expense) of foreclosing. A deed in lieu of foreclosure sounds really good in theory to many homeowners, but is difficult to negotiate in practice. For the most part, lenders today strongly prefer short sales or a foreclosure sale to deed in lieu of foreclosure because they feel as if they get better quality title to the property after a foreclosure sale, or get rid of the “problem” altogether after a short sale. A few years ago, deed in lieu of foreclosure was a viable option for struggling homeowners, but recently it has all but disappeared.
Protection Offered By Negotiating a Deed in Lieu of Foreclosure
Although lenders will not come out and admit it, it certainly appears that homeowners who attempt to offer a deed in lieu of foreclosure to their lender do receive some benefit for doing so. It is my opinion that lenders take notice of the workout attempt and the time and effort homeowners put into the negotiation process, and this make it much less likely a lender will pursue a deficiency judgment against the homeowner after the deed in lieu of foreclosure process, even if it is ultimately not successful. So, it isn’t necessarily the result that’s important, but rather the process of trying that lenders take notice of. That proactive approach can save homeowners from having a lawsuit down the road.
Deed in Lieu and Short Sale Attorneys
McFarlin LLP attorneys handle all aspects of Deed in Lieu and Short Sales for borrowers in Irvine, Los Angeles, Anaheim, Huntington Beach, Orange, and throughout California. With a matter as important as foreclosure, it is a very good idea to consider hiring a qualified California short sale attorney to represent you and protect your interests.
Our attorneys are available to provide you with honest reliable advice at our Irvine Office or over the phone.