Short Sale vs Foreclosure or Deed in Lieu of Foreclosure
Which is better?
Which is better - a short sale vs foreclosure, or a deed in lieu of foreclosure? That's the question. If you're having difficulty making your mortgage payments, you may be wondering which distressed debt option is best for you?
Well, the short answer is - it depends on your specific situation. There are some that believe in some cases it may be best to just give them the keys and walk away. Whichever option you decide, it's best to have a strategy for your desired outcome and carefully weigh the pros and cons of each option.
Besides the credit impact of a short sale vs foreclosure, or a deed in lieu of foreclosure, there are several pros and cons you should consider. But first let's distinguish a short sale vs foreclosure, and a deed in lieu of foreclosure.
What is a Short Sale?A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and may cause poorer credit report outcomes for the borrowers.
What is a Foreclosure?
A foreclosure is the legal procedure by which a lender holding a mortgage on your house forces a sale of your house to obtain repayment of your loan. Foreclosure proceedings are typically started by a lender when you do not pay your loan on time. The foreclosure process can vary from state to state.
What is a deed in lieu of foreclosure?
A Deed in lieu of foreclosure is a deed instrument in which a mortgagor (i.e. the borrower) conveys all interest in a real property to the mortgagee (i.e. the lender) to satisfy a loan that is in default to avoid foreclosure proceedings.
Now that we have an understanding of the differences between a short sale vs foreclosure and a deed in lieu of foreclosure, let's review the pros and cons of each. Then you can decide for yourself which is the best option for your situation. However, if you are facing foreclosure, I still highly recommend you consult a good real estate attorney in your state.
Benefits of Foreclosure
Foreclosure is not a very pleasant experience. It can be emotional and embarrassing. However, in some circumstances, it may be the best option. In any event here's a list of the benefits of foreclosure:
Down side of Foreclosure
Benefits of a Short Sale
Down side of a Short Sale
Benefits of a Deed in Lieu of Foreclosure
Down Side of Deed in Lieu of Foreclosure
So, depending on your personal situation, when considering a short sale vs foreclosure, or a deed in lieu of foreclosure, one alternative may be better than the other.
However, in any event, afterwards you can still legally improve your credit.
Remember, legal credit improvement is about requiring the credit bureaus and lenders to comply with the credit laws when reporting or furnishing your personal credit information. So, either learn how to legally improve your credit yourself, or hire a reputable credit repair organization to do it for you.
"Why You Should Never Ever File Your Disputes Using the Credit Bureaus' Online Dispute System"
"Why It's Not in the Credit Bureau's Best Interest to Help You Fix Your Credit"