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Deed In Lieu of Foreclosure vs. Short Sale ... Which Is Best Option for Sarasota, Bradenton, Venice, Lakewood Ranch Homeowners Seeking Florida Foreclosure Help?
"If" you can get the bank to go along, a deed-in-lieu-of foreclosure is almost always the superior option over a short sale. That said, given current real estate market conditions in Florida, the chances of a mortgagee actually accepting a deed-in-lieu are slim indeed.
To review, a deed-in-lieu-of-foreclosure occurs when a lender agrees to accept the deed for a property in exchange for not foreclosing on the property owner. This is a "win" for the property owner, because they avoid the negative impact to their credit, possible long-term ongoing debt due to a deficiency judgment, and the stigma and embarrassment that a foreclosure brings. But for the lender, accepting a deed-in-lieu-of-foreclosure only makes sense in an appreciating real estate market, not the declining market currently being experienced in Sarasota, Bradenton, Lakewood Ranch, Venice, and throughout Florida.
This is because when a lender accepts the deed to a property they are also assuming all liabilities, expenses and upkeep associated with the property. In an appreciating real estate market, rising real estate prices can offset these costs and possibly leave the lender with a small profit, so accepting the deed may make sense. However, in a declining real estate market, falling prices make it impossible for a lender to recoup the costs of carrying the property, so it doesn't make sense for them to accept the deed.
Yes, a deed-in-lieu-of-foreclosure would likely be the best option for Florida homeowners seeking foreclosure help in an appreciating market, but given the realities of today's market conditions, it turns out that a short sale is the best likely option for pre-foreclosure house owners seeking foreclosure help to stop foreclosure.
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