Deed in lieu of foreclosure: Important information
Lots of folks think that a deed in lieu of foreclosure is the way to go. But there are several things you must know about deed in lieu.
First, it is plain rare for a lender to accept a deed in lieu. They figure that they might as well go through the foreclosure process. Why? Because they get a cleaner deed than they do if they do a deed in lieu. They avoid any other junior liens that may be on the house. If you have a second trust deed, or a judgment, or some other lien, that will go away from the house when the foreclosure goes to sale. So the lender prefers foreclosure, actually.
Second, deed in lieu is no better for your credit. It will look like a foreclosure. So you aren't helping yourself with a deed in lieu.
Bottom line is you should probably forget about deed in lieu and instead pursue a short sale.
How a short sale works better than deed in lieu of foreclosure
If you owe more than your house is worth, you will need to get your lender to agree to a "short pay". They will not agee if they think your buyer is "stealing" the house — buying your house too dirt cheap.
So you really will need to find a way to sell your house quickly, at a price that convinces the lender that it is the best you can do.
And the best that they can do.
Because in this type of situation, if you sell your house it is the lender who gets all of the loan proceeds. So they are the one with the greatest concern about getting the highest price possible.
If you aren't going to get any of the proceeds anyway, you could care less how little your house sells for, right? But this is exactly the wrong way to look at the problem. Because you must secure the cooperation of your lender if you are going to sell below market value. And why should they agree to a short sale if the price is ultra dirt cheap?
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The answer is, you must prepare a short sale package that is so compelling and easy to back up, with every question answered properly. And you must expose your house to the marketplace so you can show that you did your best, and the resulting sale price is what the house is now worth, or no more than 20% below what your house is now worth.
The lenders are overwhelmed. Yours is one of thousands of cases they are handling. The person you are dealing with in the loss mitigation department has case after case after case like yours. She can handle 100 cases well but due to staff shortage in the loss mitigation department she must handle 1000 cases.
The only cases she will pay attention to are those that are picture-perfect in terms of complete paperwork, and valuation. By valuation, I mean not the price that everyone would like the house to be sold for. But a price that can be backed up.
A lender has to have eyes and ears to check out your deal. Their eyes and ears are often a real estate broker they work with who comes out and looks things over. The broker issues a Broker Price Opinion about your short sale situation. The lender uses this BPO to make a decision, yes or no, on your deal. That is, if your deal gets that far.
There are a few simple quick things you can do to hasten your deal along. If you can figure out what these things are, and present them properly, you can get your short sale done in record time, quite often. Then you walk away, free and clear, and you can even have decent credit again.
I have a system that leads you through all this. My system helps you get top dollar for your house, and convince the lender to say "yes."
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