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Answers (12)
Best Answer
- Craig Baranowski, "Craig Baranowski"
- Contributions:233
A deed in Lieu is more damaging to your credit. But the question I would ask you is what is your situation and what are you trying to do with your property?
A short sale is a great option if you need to sell your property because your are insolvent both long term and short term, and you have negative equity on the property.
If you would like to stay in your home and your financial hardship is short term, a mortgage modification or loan modification is a much better alternative.
Both a short sale and loan modification are much better alternatives to a foreclosure, deed in lieu or bankruptcy.
- David & Maria-Nella Landman, "PrimeOne Realty"
- Contributions:101
Deed in lieu. Not selling you my services, this is really easy. Short Sale is an agreement, deed in lieu is a short cut. Short Sale will settle the account in full ( in most cases) deed in lieu will only pass title to Lien Holder with no other conditions in your favor.
- Peggy Banks, "Peggy Banks"
- Contributions:522
Thanks for this chart Pasadenan Man, I love visuals like this to show clients. I just saved to my computer & will include it with my short sale initial consultation package. I must have missed it when it was posted. There,s still good reasons to use a Realtor. Someone to deal with the bank for them or if they qualify for the HAFA program, I help them get the $3,000 moving expenses.
- Pasadenan
- Contributions:21365
Here is the list that was published on this website this week:
(Of course agents will tell you a deed-in-lieu is "worse" as they don't get a commission from that...)
(Of course agents will tell you a deed-in-lieu is "worse" as they don't get a commission from that...)
- Matt Mahoney, "Matt Mahoney"
- Contributions:5
A deed in lieu is way worse on your credit than a short sale. I would suggest that you find a quality broker to talk to about this, talk to a licensed broker with a cdpe designation.
- shasta_steve
- Contributions:448
I know this is old but the knowledge of the real estate industry on this topic is pretty sad to say the least.That or they are just outright lying. If you went late on your short sale, then the actual credit drop is almost identical. Very few people out there are able to do a short sale and remain current on their mortgage. My FICO states that the credit drop for short sales and foreclosures is the same. I can tell you from personal experience that my foreclosure caused my credit to drop right at 80 points. I am over 700 and rising a few months after mine.
In non-recourse states the short sale can actually leave you vunerable to the bank slipping something your contract that may make you liable when you would not have been if they had just foreclosed. Another thing you real estate agents need to keep in mind when you comment on things like this is it has more to do with state law than anything else. Advice from Florida is absolutlely worthless in California and vice versa.
- Toby & John T. Williams, "tjplace"
- Contributions:271
What I have been taught and my understanding is, and I am NOT an attorney or accountant, is this: a short sale can effect you credit by appoximatley 50 points and an actual foreclosure by 200 points! A short sale should stop the bank from coming after you in the future. A foreclosure leaves it open for the bank to come after you for the loss in the future. I am not sure what happens when you give the keys back to the bank voluntarily in a deed in lieu.
- Lisa Treu, "The Treu Group"
- Contributions:402
We'll be speaking with our attorney on our radio show today at 8:30 am on www.wjno.com. If you have short sale question or options, we hope you can tune in and get some free legal advice.
- Michael Lindekugel, MBA CDPE, "mlindekugel"
- Contributions:150
This is not tax or legal advice. Seek appropriate tax or legal counsel.
Short sale is much less damaging to your credit than a deed in lieu. A properly negotiated short sale will show up as a debt paid in full. There will be no indication on your credit that the sale was a short sale. The hit to your credit will come from late payments or no payments which could prevent you from obtaining credit. The hit will be 25-100 points which should drop off your credit report after two years.
The short sale should be negotiated so the lien holders accept the short sale as payment in full with no recourse. You will receive a 1099 for the forgiven debt. If the lien holder has recourse, then you will not receive a 1099 and the debt continues to be collectible. A lender can forgive the debt and issue a 1099 or continue to collect the loan deficiency but not both.
If the property is a primary residence, then up to $2M of the loan deficiency may not be taxable income. Please seek appropriate tax or legal counsel. Mortgage Debt Forgiveness Relief Act and Debt Cancellation http://www.irs.gov/individuals/article/0,,id=179414,00.html
A loan modification is a good idea, but you need to be aware that it may not solve your financial problem. According to Comptroller John Dugan, Office of the Comptroller of the Currency, after six months more than 50% of borrowers who received a loan modification re-defaulted. http://occ.treas.gov/ftp/release/2008-142.htm
Cheers,
Michael P. Lindekugel
Commercial Realtor
Certified Distressed Property Expert
- Daniel Reynolds, "Broker Executives"
- Contributions:355
Either way it will still stop you from obtaining financing from FHA. Short sale or Deed in Lieu. Minimum time to obtain financing afterwards is three years.
- Debby Thompson, "Homestead Realtymilw"
- Contributions:275
A deed in lieu is the worst. A lot of banks might not even be willing to take a deed in lieu. Try a short sale that is the better of the three (deed in lieu foreclosure and short sale. )
What is worst on credit? Deed in lieu or a Short sale???
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