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Can I Short Sell My Home or Hand it Back to The Bank with a Deed in Lieu and Save My Credit? – Angela

“Dear Andy,

In 2006, I had a house built from the ground up for my mother to lived in. I paid the mortgage every month always on time. Never missed a payment.

My mother passed on 1/11/11, the house is now vacant. I put the house up for sell in March 2011. I paid 180,000 for the home and now owes $153,000. I can no longer afford the mortgage. Can I returned the home to the bank without affecting my credit? The home is in San Antonio, Texas. I lived in California. Very few homes are now selling. What can I do to saved my credit. Help!!

Angela”

Angela,

The value of your home will have a lot to do with the options that you have available. I understand that you currently owe $153k. What price have you had the home listed at since March?

If you have had the home listed at just enough to pay off the mortgage and pay your fees, it may be time to begin lowering the list price, even if that means it will not cover everything. If it sells for just under what you owe, then you will have the option to pay the difference out of your pocket. Yes, this would probably be the most expensive option for you, but it wouldn’t result in any damage to your credit rating. In fact, it may actually improve your credit rating by removing the debt by paying it off as agreed.

If you receive and accept an offer that is not enough to cover everything, and you don’t have the ability to pay the difference yourself, then you can always request a short sale approval from your lender. They may be able to accept that lower payoff as payment in full, and quite possibly forgive the difference. This may hurt your credit rating for the next year or two (especially if you have a very good credit rating now), but it wouldn’t be as extreme as foreclosure or bankruptcy would.

If you have tried to sell the home conventionally and also as a short sale for more than 90-180 days, you can also request a deed-in-lieu of foreclosure. This is the process where you basically hand the keys back to the lender, and they release you from the obligation. Every lender is different in their policies and procedures with a deed-in-lieu of foreclosure. Most require that you have made an honest attempt to sell the property by all means available, and they also typically require that you can demonstrate a financial hardship. Contact your lender directly to ask how to apply for a deed-in-lieu of foreclosure.

Of course you could always stop making the mortgage payments and let the home go into foreclosure. This would be devastating to your credit rating though, and should only be considered as an absolute last resort.

Good luck Angela, and please keep us posted on your progress in the comment section below.

Best Regards,

Can I Short Sell My Home or Hand it Back to The Bank with a Deed in Lieu and Save My Credit?   AngelaAndy is a licensed real estate broker in Massachusetts and is the founder of Northeast Properties in Norton, Massachusetts. His brokerage is designed to help homeowners in today’s difficult real estate market, specializing in short sales. Andy speaks with Massachusetts homeowners every day, helping them to address their questions or issues with short sale or loan modification. He enjoys helping consumers arrive at the correct solution to their problem, and believes that the only way to correctly do that is by presenting them with all of their options in an un-biased manner.

If you have a mortgage, short sale, real estate, or loan modification question you’d like to ask just use the online form. I’m happy to help you totally for free.

Can I Short Sell My Home or Hand it Back to The Bank with a Deed in Lieu and Save My Credit? - Angela by

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About Andy Faria

Andy Faria
Broker/Owner of Northeast Properties – real estate brokerage President/Owner of Northeast Settlement Group – performance based debt relief
  • Kristen

    I am in a similar situation and have been trying to short sale my home for 7 months now.  The original hardship is due to a job loss and increased credit card debt, and now just an overall reduced income because I can’t find a new job in my career field.  The mortgage lender/bank took so long reviewing my short sale application, that the first buyers walked away and I had to re-list the property.  I have new buyers and it is under review again, but with the bank taking so long, it is hurting my credit because I am not paying my mortgage all this time.  It was their requirement that if I want to be reviewed for a short sale, I must be at least 31 days delinquent.  But now they say “we would never advise our borrowers to be delinquent”.  Its so frustrating that even though I’m trying to do the right thing to sell the home in this upside down real estate market and move into something more affordable for me, the bank is penalizing me for it by hurting my credit and threatening foreclosure.  I attempted a loan modification 3 times but they think I can’t afford to even make the potentially reduced payments so they would not help me at all.  Its like I’m a lost cause. 
    Since I haven’t been paying mortgage, they say my file is in foreclosure (although I have not actually been served/sued) and both short sale review and foreclosure processes can take place simultaneously.   Since it has been more than the 180 days in short sale review, that would mean I could qualify for deed in lieu, right?  I would only do that if I am at the point of foreclosure or if they do not approve the short sale. 
     

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