Short sale vs. deed in lieu: which exit fits your situation

When keeping the house isn't the goal, or isn't realistic, a short sale and a deed in lieu of foreclosure are the two main ways to exit before a sheriff sale happens. A short sale means listing and selling the home for less than what's owed, with the lender agreeing in advance to release the lien for less than the full payoff. A deed in lieu skips the sale process entirely: you sign the property directly over to the lender in exchange for being released from the debt. Both can avoid a completed foreclosure judgment on your record, but they work very differently and lenders don't approve either one automatically.

What a buyer should expect: the attorney will look at how many liens are on the property, since a short sale usually needs every lienholder to agree, and will negotiate whether the lender will waive its right to pursue a deficiency judgment for the difference between what's owed and what's recovered. Timeline matters too, a short sale generally takes longer since it involves finding a buyer, while a deed in lieu can sometimes move faster once the lender agrees to accept it.

• Negotiating short sale approval and deficiency waivers with the lender
• Reviewing all liens on the property before either transaction moves forward
• Preparing and negotiating a deed in lieu agreement
• Explaining the credit and tax implications of each path