A Short Sale or a Deed in Lieu of Foreclosure?
Many local families have reached a similar conclusion: they can no longer afford their house. A lost job, medical emergency, accident, or a thousand other situations might plunge a family into financial trouble, making it impossible to meet mortgage obligations. Obviously, if payments are not made the bank will eventually initiate a foreclosure. But, it is vital for homeowners to understand that there are other options to deal with the difficult situation without going through the stressful (and credit-damaging) foreclosure process. Two of the most common are a short sale and deed in lieu of foreclosure.
New Jersey Short Sales
In a short sale the borrower gets permission from the lender to sell the home to a third-party for less than the total amount due on the loan. The main benefit of the short sale is that it allows you to get out from under the mortgage without a foreclosure and potentially eliminates the risk of a “deficiency.” In New Jersey, even after a foreclosure, a lender may sue the borrower for any amounts owed on the original loan not satisfied by the foreclosure sale. Alternatively, when working with a New Jersey short sale lawyer, our attorneys will work toward getting the lender to agree to forgive the deficiency following a short sale.
Deed in Lieu of Foreclosure
Similarly, a deed in lieu of foreclosure involves a homeowner giving up their interest in the property in exchange for forgiveness of the loan. However, instead of selling the house to a third party, with a deed in lieu of foreclosure the homeowner gives the lender the home in exchange for canceling the loan. As with a short sale, it is imperative that the lender be made to agree, in writing, to forgive any deficiency.
The ultimate benefit to the homeowner is similar in both a short sale and deed in lieu of foreclosure: the home is given up in exchange for loan forgiveness.
Which Option is More Feasible?
Much may depend on the motivation of the lender. For example, a deed in lieu is convenient in that it absolves the borrower from needing to obtain a bona fide offer that the lender will approve. Yet, lenders are not always interested in obtaining property directly. They usually prefer cash–after a sale—instead of obtaining ownership of a home via a deed in lieu. However, receiving the deed in lieu might be a better option than going through a foreclosure and incurring the related expenses. Banks are interested in their bottom line.
What is Right for You?
Only a qualified legal professional who knows about the specifics of your exact situation can provide proper advice on what option is best for you. When visiting with a Burlington county real estate attorney, the legal professional will explain the feasibility of different strategies in your case depending on preferences of lenders. That is why it is crucial to have an advocate who has worked with banks and understands their motivations. It is the best way to reach a beneficial agreement with the bank that allows you to move on with your life.