* Real Estate Articles and Q & A *

Karin, in Short Sale situation, typically the property isn't worth as much as the homeowner owes on the mortgage, the home owner tries to convince the mortgage company to take less than the amount owed on the mortgage. Depending on how much less the mortgage company is willing to settle for, it definitely could be a better deal for them (Mortgage Company) than letting the property go into foreclosure. The benefit for the mortgage company is that they avoid the costs associated with foreclosure and don't have to keep a property in their REO inventory. The seller usually doesn't get anything out of the deal since all the money goes to paying off the mortgage and related expenses. The benefit for the seller is that they get out from under a big problem and avoid foreclosure and a probable deficiency judgment.

A Deed in Lieu, the borrower tells the mortgage company to take the property back. The borrower does not want to go through the hassle of short sale or foreclosure procedures. They simply want to get out of the burden.

Actually, as far as the credit rating is concerned, the end result is almost the same for the defaulted borrower. They are both considered major derogatory items and most lenders treat them as a foreclosure for the purpose of deciding whether to lend to that person in the future.

The information provided is not and should not be considered legal advice. Nor do I promise or guarantee that the information contained on this post or any linked site is accurate, correct, complete, or current. You should seek the advice of competent counsel licensed to practice in your state to answer specific legal questions.