After exhausting all alternatives and doing as much research as you can into possible options, you may still come up short and realize that you just can't afford to keep your home.  It's a tough realization, and one that probably hurts emotionally as well as financially.  Still, its better to face reality and make the best choices you can.  Here are some options you might want to consider if you can't afford to keep your house.

 

• Deed in lieu – If you don’t want your home and/or

absolutely cannot afford it, you can offer the servicer a

deed-in-lieu (pronounced “loo”) of foreclosure. This means

you give your house back to the servicer in exchange for

avoiding having a foreclosure on your credit record.  

 

    –  Important: If your house has declined a lot in

       value, Servicer may ask you to sign a note to pay

       back difference between what the house is worth

       and what you owe. This is called a deficiency

       note. If you ask at the time you offer the deed-in-

       lieu, the servicer may agree not to pursue a

       deficiency.  

 

    –  If you have a second mortgage or if you have a lot

       of judgments against you from previous debts you

       probably won’t qualify for a deed-in-lieu. 

 

• Pre-Foreclosure Sale – If you are delinquent, in

default, or already in foreclosure, you can still sell your

home and pay off your loan at any time up until the day

of foreclosure.  Servicers call this a pre-foreclosure sale. 

 

    –  You should tell your servicer if you are trying to

       sell your home. If you choose to list your home

       with a real estate agent you may want to

       click here for a list of real estate agents in your

       area interested in helping you with a pre-

       foreclosure sale. 

 

 

• Short Sale – If you are trying to sell your home,

typically with a real estate agent, and you receive an

offer for less than you owe, the servicer may agree

to accept the lower amount from the sale and release

the mortgage. This is called a “short sale” because

the lender is accepting a shortage in the amount owed.

 

    –  After the lender agrees to a short sale they may

       still pursue you for the difference between the

       proceeds from the sale and the total amount you 

       owed. This is called the “deficiency.” 

 

    –  You should ask the lender to release you from any

       deficiency when you propose the short sale. They

       may or may not agree to it, but it’s important to

       ask.  

 

• Straight Sale – If you receive an offer to buy your

house for more than you owe, you can accept the

offer and simply pay off your mortgage in full at

closing. If you are in foreclosure and the day of the

foreclosure sale is near, be sure you work with your

servicer to postpone the foreclosure sale. 

 

    –  Many perfectly good sales have fallen through

       because the house went to foreclosure sale the

       day before the scheduled closing. 

 

• Sale with Lease Back - Sometimes real estate investors in your area will purchase your home with the intent of leasing it back to you. The sale may be either a short sale or a straight sale.

 

    –  You should have any lease back agreement reviewed

       by an attorney because some investors include

       unfair terms. 

 

• Cash for Keys – In a ‘cash for keys’ deal, the lender will typically pay you a few thousand dollars if you agree to leave the house in good condition by a certain date. The money is intended to help you move your belongings and pay a security deposit for your new rental residence. 

 

    –  Cash for keys may be available after a deed-in-lieu,

       a sale, or even a foreclosure.