Foreclosure or Deed In Lieu?

[uncrunner]

Hello,

Thanks HHM for helping in my last thread.

My wife and I are separating and I won't be able to afford our home. It is about $20,000 underwater and neither one of us want the house. Short sales are not an option because I would have to keep the mortgage current which I can't and I can prove that I am insolvent which might would help me against the bank coming after me for the loss.

So which would be a better alternative: Straight out foreclosure or deed in lieu? I gather that it may be up to the bank but if not what are the pros and cons of each?

Thanks.

[uncrunner]

I guess also pros and cons in terms of the bank coming after us for the loss or the damage to our credit score? Thanks.

[HHM]

DIL's are rare, the bank must agree to do it. Most banks won't. Same damage for DIL and Foreclosure on credit. As with your other thread, the deficiency issue works exactly the same as in foreclosure and short sale. However, in the DIL and Short Sale scenarios, you can negotiate over the deficiency to some degree.

[uncrunner]

Would you or anyone suggest getting a BK attorney if I plan on doing a foreclosure?

[HakunaMatata]

Are you positive you would have to remain current on your mortgage in order to negotiate a short sale?

Generally, a DIL will benefit the lender more than the owner (they save on foreclosure costs). The benefit to the home owner is a quicker Deed transfer (some prefer this because they wish to accelerate a future mortgage or are responsible for HOA fees). Foreclosure is costly to a lender; however, it is typically the safest form of Deed transfer. Foreclosure can be financially advantageous to the home owner since one can live "rent-free". Both DIL and foreclosure will adversely affect your credit score. This should be of little concern if you don't have means to maintain your property. Focus on survival and maintain a business mindset.

If you don't have considerable debt, you may wish to contact a real estate attorney. Deficiency judgments aren't a given; however, if one surfaces later down the road you may be able negotiate a lesser amount or file BK to eliminate it.

[uncrunner]

My short sale specialist said I would want to have less than 90 days in arrears for a short sale to work. BOA said I need to try to sell my home at market value for at least 90 days until they would consider a short sale. SHort sale was going to be the way to go until my soon the be ex made it clears she wants out of the house. I cannot afford the payment and I cannot afford to get it cleaned, fixed, painted, and repaired to get it in pristine shape to have a great chance of straight selling it much less on a short sale (two kids can beat up a house). I am just really worried that the house will sell under foreclosure for $40,000 less than we owe and they will want me to come up with $20,000 (wife on note). I don't have that kind of money. I could pay taxes on it though since I sell real estate and, well, Barney Frank and Senator Dodd took care of my ability to make an income. :-)