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Short Sale - How it Affects Your Credit
By
Dan Forbes
Facing a
foreclosure, you may have another option,
consider a "Deed in Lieu"; with a deed in
lieu, you are relinquishing your rights to
the property, especially giving the property
to the lender. This is much better then a
foreclosure, if you are able to do it, each
state has different laws therefore you need
to do some research and ask for legal advise
before pursuing this type of transaction.
Some lenders may prefer this to the
foreclosure process, it is expensive and
time consuming. A "Deed in Lieu" also comes
across your credit report much better then a
full-blown foreclosure; the foreclosure
process will have exceptional damaging
affects on your credit report and therefore
will take a long time to fix. It could
hamper your ability to purchase another home
for 7-10 years.
A "Deed in Lieu", if negotiate properly
should keep a foreclosure off your credit
report and protect your credit from the
damages of such a recording. While working
with your lender during the default process,
negotiate the terms of how it will report to
the credit agencies. The lenders will save a
tremendous amount of time and expense by you
simply giving the house back to them in lieu
of the foreclosure process. For doing your
part to save them as much time and money as
possible, if is only fair that they assist
you with trying to keep your credit as clean
as possible.
Let the lender know that leaving the house,
clean and in good shape is not a problem,
but by doing so you do not want to have a
foreclosure reported to the agencies. Get it
is writing. Agreeing to this verbally, will
not help you, banks love to give "lip
service", it is what they do to get what
they want.
There are other options if you are facing a
foreclosure; a "Deed in Lieu" is not
necessarily the best one. Depending on how
equitable the property is you may be better
off selling the home to a private buyer, or
even an investor. Salvage the equity if you
can you did work for it. They may even let
you do a rent back so that you will not have
to move. If your best option is to do a
"Deed in Lieu", doing so with the lender is
preferred, more so then an investor. Only by
dealing with the lender are you able to
terminate the original loan agreement.
Dealing with an investor will not terminate
the original contractual obligation with the
lender. A lender that fails to perform on
the agreement will you, will leave you
vulnerable in the event the bank moves
forward with a foreclosure. If you decide to
use an investor, investigate them, make sure
that they have adequate resources to keep
the loan up-to-date.
A home foreclosure is not the end of the
world; there are many options available to
homeowners that are facing one. While it may
seem that you have few options, or that your
world is falling apart, remember investigate
all options prior to making a decision. Hire
a professional to assist you with all the
legal and personal ramifications or each
option. While most homeowners will not
resort to a "deed in lieu", address the
situation immediately, and choose wisely.
Conclusion
Are you one
of the many that suffer from insurmountable
debt and wonder if bankruptcy is an option?
Give us a call at (203) 924-6700 or
contact us.
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