If you face foreclosure and your bank has denied your request for a loan modification or forbearance, there are a couple of other options before you that can help you avoid foreclosure: a deed in lieu of foreclosure, or a short sale. Because they are both similar, it’s easy to get them confused. But, there are differences in each. Consider retaining experienced foreclosure defense services to help you through these options, explain the differences between the two, and help you understand how each option can help you.
A Short Sale
A short sale is when a homeowner sells the home to a third party for less than the total amount owed on the mortgage. The lender has to agree to accept the proceeds of the sale and, in exchange, releases the lien on the property. The bank’s loss mitigation department must approve the sale before the transaction can be completed. The loss mitigation application includes a financial statement, proof of income, tax returns, bank statements, a hardship letter and a purchase offer.
Your short sale application will most likely require you to include the offer to purchase from the buyer. Lenders usually want an offer on the table before they’ll even consider a short sale.
Deeds in Lieu of Foreclosure
Another option for you to consider is a deed in lieu of foreclosure. This is a transaction where the homeowner transfers title of the home to the lender in exchange for a release from the mortgage.
As with a short sale, you first must ask the lender for a loss mitigation package. The application needs to be filled out and submitted, along with the requested income and expense documentation. The lender may also ask you to try and sell your home for at least three months before it considers accepting a deed in lieu of foreclosure. The lender may also ask for a copy of any listing agreement as proof of your attempt to sell the home.
For more information on foreclosure defense options, contact us.
