Real Estate Tips

Painful Choices: Short Sale or Deed in Lieu of Foreclosure?

Our nation's mortgage meltdown has resulted in many stressed and relocating homeowners wondering what to do. Some are able to renogiate the terms of their mortgage with their lenders, while others are helplessly under water.

They are left to wonder:

Is it simpler to just let the home go to foreclosure?

Perhaps the lender will accept a deed in lieu of foreclosure?

Or should they go through the uncertainties and aggravation of a short sale? Fannie Mae’s recent announcement seems to provide some real clarity for owners of homes in default.After studying the announcement, we can only conclude: Avoid foreclosures, bankruptcy and deed in lieu of foreclosure if at all possible. It is far, far better to have a short sale–or a pre-foreclosure sale–as a resolution.


Under the Fannie Mae Announcement (released 06/26/2008), short sales or those engaging in pre-foreclosure sales will be cleared to borrow on another home via Fannie Mae in just two years from completion date of the short sale. This may be painful, but two years is far preferable to the alternative of 5 to 7 years if the home goes to foreclosure and 4 to 7 years if one opts for deed in lieu of foreclosure.

Please distance yourself from anyone advising that there is no difference between a short sale and foreclosure–or that a deed in lieu of foreclosure may be preferable to either. If homeowners were to follow this disastrous advice, our country’s real estate market would remain in the troughs for at least another five years–and by that time we might have gone through an economic depression of epic proportions.

If your home is in default, contact a qualified short sale specialist as soon as possible to help avoid the long-lasting consequences of foreclosure. The best buyer for your home may a cash buyer who is in a position to perform on short notice–at no cost to you.

There is even the possibility that your agent and negotiators may be able to get the lenders to drastically reduce or eliminate potential deficiency judgments.

Wherever you live, it is imperative that you act immediately if you are in danger of losing your home. If you let it go to foreclosure, you could be throwing away buying opportunities for the next five or so years.