Pursue short sale before deed-in-lieu

Home Sale Hindsight

Future-Proof: Navigate Threats, Seize Opportunities at ICNY 2018 | Jan 22-26 at the Marriott Marquis, Times Square, New York

Q: I just listed my home for sale as a short sale. But a friend of mine just mentioned the deed-in-lieu of foreclosure to me, and now I'm thinking I should have gone that route. What do you think? A: Your scenario is not an either/or situation. To anyone who owns a home and owes more on it than it is currently worth -- that state of affairs we now curiously call being "upside down" or "underwater" -- a deed-in-lieu seems like the best of all situations for sheer speed of closure and minimal effort required. With a deed-in-lieu, you quite literally hand the keys back to the bank. The bank agrees to take the home back, and you sign the deed over to the bank. For credit and tax purposes, a deed-in-lieu is identical to a foreclosure. However, because a deed-in-lieu seems to promise instantaneous divestment of a now-toxic asset, it seems vastly preferable to foreclosure -- and to the six-plus months of payments a homeowner must miss in most states before a foreclosure becomes final...