Many homeowners facing foreclosure determine that they just can't afford to stay in their home. If you plan to give up your home, but want to avoid foreclosure, consider a short sale or a deed in lieu of foreclosure. These options allow you to sell or walk away from your home without incurring liability for a "deficiency" -- the amount by which your remaining loan obligation exceeds the value of your home.
If you are a homeowner facing foreclosure, a short sale might sound like the perfect solution to your problem. After all, with a short sale you sell your home for less than the total debt balance remaining on the mortgage and the lender agrees to release the lien on the property. What could be easier?
If you want to simply hand over ownership of your house to the lender and get your loan canceled in exchange, you can propose something called a deed in lieu of foreclosure. If your lender agrees, it will accept a deed to your property and in exchange, promise to not initiate foreclosure proceedings
In a short sale, you sell your house before it’s auctioned off in foreclosure, usually for an amount that falls short of what you owe on it. For a short sale to work, your lenders must agree to receive less than they are entitled to under the terms of the loans you signed. Why would they do that? They