Jaxbuyer Blog

A short sale is a popular option for homeowners mired down with financial problems. In this case, you would sell your home for less than what you owe your lender; the biggest problem you will face is getting your lender to agree to a short sale. In many situations, they will not. Experts advise pursuing this option the minute you realize that you are falling behind in your payments and most likely won’t be able to catch up. The longer you wait and the greater the amount you are in arrears, the less likely it becomes that your lender will even be willing to discuss a short sale.

The inevitable result of a foreclosure is the lender taking your house. Not only will you lose your house, but the lender can get a judgment against you for the arrearages you owe plus his costs for the foreclosure action. If that isn’t enough, your credit report will be in terminal condition for many years to come, worsening an already bad financial situation and making it very difficult to obtain any other kind of credit. There is no upside to foreclosure. It should be avoided at all costs.

A deed-in-lieu of foreclosure is when you give your home back to your lender, take your losses, preventing foreclosure. Lending institutions may accept this because it is less expensive and time consuming for him than full foreclosure. The good news is that a deed-in- lieu is a faster solution than a short sale and that it is possibly more likely to be acceptable to the lender. The ramifications to your credit score are about the same as the short sale.

The bad news is that if the lender sells the home for a price that doesn’t pay off the original mortgage amount, he can get a deficiency judgment and try to collect it from the ex-homeowner, but all the while knowing they may not have the money to pay the deficiency anyway.

The sooner you act on either a short sale or a deed-in-lieu the better. Once the foreclosure process is activated, you will not be in a good position to negotiate with your lender because payment arrearages, interest and penalties have piled up. He can hold you financially responsible for his losses and seek a deficiency judgment that will appear on your credit report even if you don’t have the money to pay it. Either way, avoiding foreclosure is always a better choice in terms of the effect on your credit.

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