What"s the Difference Between a Deed in Lieu and a Short Sale?
In these difficult economic times, there are many words and phrases being thrown around that can be confusing to homeowners, especially homeowners who are stressed about not being able to make their mortgage payments. The short answer when looking at the differences between Deed in Lieu and Short Sale is that their conclusions are arrived at by completely different processes. In a Deed in Lieu situation, the homeowner leaves the fate of their property at the mercy of an overworked bank employee. In the superior option, a Short Sale, the homeowner makes an educated choice to find a cash buyer who will negotiate with the lender on their behalf.
The phrase "Deed in Lieu" is short for Deed in Lieu of Foreclosure and refers to a contract that a distressed homeowner (someone who can't afford their mortgage payments) makes with their lender (typically a bank). This process can take months because once a homeowner fills out his paperwork and submits his contract to the lender, it becomes a file on someone's desk and gets buried in a stack full of other similar files. The bank employee has no vested interest in what happens to the file, and he sees so many similar situations that the file is just one more piece of paperwork to get through.
A Short Sale, on the other hand, is a process in which a cash buyer will negotiate with the lender on the homeowner's behalf, in order to purchase the property from the lender for less than the homeowner's mortgage balance (thus leaving the lender "short"). A Short Sale is beneficial for the lender because it costs them less in legal, payroll, and other fees, while at the same time being beneficial for the homeowner because it prevents them from going into Foreclosure when they find themselves in a house that is worth less than the amount that is owed. The cash buyer is an experienced Short Sale negotiator who will keep in contact with the bank and the homeowner so that everyone stays informed and comfortable throughout the entire process. Finally, it is important to note that the buyer does not get paid until the deal is complete, so there is a vested interest in making sure that the negotiations are handled properly.
There is one important similarity between a Deed in Lieu and a Short Sale: they are both far less disastrous options than a Foreclosure. Typically a Foreclosure will stay on a credit report for seven years or more, and prevent the individual from securing loans and building up credit. A Deed in Lieu and a Short Sale, on the other hand, can be removed from credit reports in as few as three years, and do not always prevent loans during that time. Contact the three credit bureaus for their individual rules regarding credit reporting.
In summary, a Deed in Lieu and a Short Sale are two other options to consider if you are facing a Foreclosure during these tough economic times. Do yourself a favor and find an investment firm looking to make a cash offer on your house so you can rest assured that you are not the only one who is concerned about your home and your family's future.
The phrase "Deed in Lieu" is short for Deed in Lieu of Foreclosure and refers to a contract that a distressed homeowner (someone who can't afford their mortgage payments) makes with their lender (typically a bank). This process can take months because once a homeowner fills out his paperwork and submits his contract to the lender, it becomes a file on someone's desk and gets buried in a stack full of other similar files. The bank employee has no vested interest in what happens to the file, and he sees so many similar situations that the file is just one more piece of paperwork to get through.
A Short Sale, on the other hand, is a process in which a cash buyer will negotiate with the lender on the homeowner's behalf, in order to purchase the property from the lender for less than the homeowner's mortgage balance (thus leaving the lender "short"). A Short Sale is beneficial for the lender because it costs them less in legal, payroll, and other fees, while at the same time being beneficial for the homeowner because it prevents them from going into Foreclosure when they find themselves in a house that is worth less than the amount that is owed. The cash buyer is an experienced Short Sale negotiator who will keep in contact with the bank and the homeowner so that everyone stays informed and comfortable throughout the entire process. Finally, it is important to note that the buyer does not get paid until the deal is complete, so there is a vested interest in making sure that the negotiations are handled properly.
There is one important similarity between a Deed in Lieu and a Short Sale: they are both far less disastrous options than a Foreclosure. Typically a Foreclosure will stay on a credit report for seven years or more, and prevent the individual from securing loans and building up credit. A Deed in Lieu and a Short Sale, on the other hand, can be removed from credit reports in as few as three years, and do not always prevent loans during that time. Contact the three credit bureaus for their individual rules regarding credit reporting.
In summary, a Deed in Lieu and a Short Sale are two other options to consider if you are facing a Foreclosure during these tough economic times. Do yourself a favor and find an investment firm looking to make a cash offer on your house so you can rest assured that you are not the only one who is concerned about your home and your family's future.
