Quit claim deed or foreclosure or short sale? Which is better if you are between a rock and a hard financial place? Let's see how fast I can get to the point and cover what is really a very detailed and complex subject.
First, if you are unable to make your mortgage payments, will the bank just let you quit claim deed it back to them? No. Banks have been refusing to do this for decades, although every once in a while I hear a rumor of it happening somewhere. I think it happened in St. Louis in 1987. People talk about it all the time, but it is as rare as Mermaids. Even if it was a wise financial move for a bank to do, they are instructed not to by their legal counsel, in part because if they suffer a loss, they probably cannot recover on their HUD insurance or VA guarantee. They can recover on their insurance for losses only if they go through the foreclosure process, or in other exceptional circumstances. So they won't go there.
Second, what about a short sale? A short sale happens when your home is sold for less than the balance of the mortgage. This is happening fairly regularly in the hardest hit real estate markets in the country, but on the Olympic Peninsula in Sequim or Port Angeles, good luck trying to get a short sale through, unless a local bank actually holds the mortgage (very rare). Seriously, the short sale departments of large banks are typically on the east coast, and there is almost no one to talk to, no one who will return phone calls, and no one will respond to faxes. I'm dead serious. I've had three solid offers accepted by sellers but we could not get the banks to even respond, and trust me, we were communicating with the right short sale departments. I've written elsewhere about the chaos in the banking system when it comes to short sales and foreclosures.
Third, a non-judicial foreclosure in Washington is almost certainly the most likely scenario if you are unable to make your mortgage payments. It takes a minimum of 6 months, but banks typically take 10 months to a year. They cannot come after you for a deficiency if they suffer a loss in a non-judicial foreclosure, but if the bank decides to do a judicial foreclosure, they could come after you for their loss. They only consider doing the later if you have a lot of assets they can chase.
Read more about Quit Claim Deeds, Short Sales, and Foreclosures on Sequim Real Estate News.
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