Deed in Lieu and Short Sale
- Are you stressed out about falling behind on your mortgage payments?
- Are you feeling like your whole world is crashing down around you?
- Are you unsure about what to do next?
Oftentimes, as a top Orange Park Short Sale Realtor, I help homeowners like you understand and evaluate their next move when it comes to falling behind on mortgage payments. If you are exploring your foreclosure prevention options, then you've come to the right place.
There are two common foreclosure prevention options in Florida: Deed in lieu and a short sale.
Both of these foreclosure prevention options - deed in lieu and short sale - are what we call "friendly foreclosures." In Florida, the foreclosure process will typically start after two consecutive missed mortgage payments. After two missed mortgage payments, your lender will send you a notice in the mail called a notice of default.
Don't ignore this letter! In this letter, you will be assigned to a loss mitigation specialist; this is a representative from your lender whose sole responsibility and purpose is to help you get back on track. If you work with this individual, you may qualify for either a loan modification or a deferred mortgage payment plan. A deferred mortgage payment plan would be an option for you if your hardship situation is temporary.
Oftentimes though, homeowners facing foreclosure determine that they just can’t afford to stay in their home with or without a loan modification or deferred payment plan. Liquidating yourself- i.e. your home - maybe be the only way to avoid foreclosure and the negative blemish that will appear on your credit report as a result of a foreclosure on your credit report.
Some Homeowners who owe more than the fair market value of their home usually consider a short sale or a deed in lieu (DIL) of foreclosure. These options, short sale or deed in lieu of foreclosure, in most cases will allow you to sell or walk away from your home without incurring liability for a “deficiency balance.”
What is a Short Sale?
In a short sale, a homeowner generally owes more than the fair market value of the home. In other words, in a short sale selling situation, if a homeowner were to sell, the proceeds from the sale of the home not over the total needed to pay off all of the liens associated with the sale. A homeowner considering a selling short is commonly referred to as being “underwater" and yes, in FL, a lender can sue to obtain a deficiency judgment to compensate them for the deficiency balance; that's the short or the balance of what is owed.
What is a Deed in Lieu of Foreclosure
With a Deed in Lieu of foreclosure, you give your home to the lender (the “deed”) in exchange for the lender canceling the loan. The lender promises not to initiate foreclosure proceedings and to terminate any existing foreclosure proceedings. The lender generally agrees, in writing, to forgive any deficiency (the amount of the loan that isn’t covered by the sale proceeds) after the house is sold.
Before the lender will accept a DIL of foreclosure, they will probably require that you put your home on the market for a period of time (three months is typical). Banks would rather have you sell the house than have to sell it themselves. If you receive an offer during the time your home is listed for sale, yet the offer does not cover the balance of the liens against the property including real estate commission, real estate transfer tax, attorney fees, etc, you are engaging in a short sale.
All short sales are subject to bank approval; they typically take 3-6 months to process. During the processing time and while your home is listed for sale, you are expected to maintain the property, pay:
- your homeowner's insurance,
- homeowner's association fees (HOAs) if applicable
- real estate taxes, assuming your real estate taxes were not escrow-ed at the time you financed your home.
- Utilities and maintenance for the property
Contact Short Sale Realtor Robert Schwabe today to find out if you qualify for a deed in lieu of foreclosure or a short sale. (904) 403-2429