Deed In Lieu vs. Short Sale


Team Superstar's,

Are the ramifications worse for your credit with a Deed In Lieu Of or a Short Sale? Chase called yesterday to discuss a Deed In Lieu Of. I let the Negotiator know I was attempting to sell via short sale. She told me that the file would be transferred to the Short Sale Department and closed on her end. Not sure how they decided I was looking for a DIO in the first place. I had submitted all the paperwork off their web site for the Short Sale Packet. The only thing I can figure was that the property was listed a year ago and short sale never happened (I was not involved and did not have Realtor who had completed short sales in the past - shame on me). After reading your web site and others everyday I realize the process will only work if I am involved and prepared to provide my Realtor with the things they need when they need them (I checked out the Realtor to make sure I was not his first short sale).

I assume you go short sale and then DIO if all else fails. Is a DIO the same as a foreclosure? 

Thanks..

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Replies to This Discussion

Permalink Reply by Steele V. Propp on March 30, 2011 at 3:47pm

A deed in Lieu (DIL) is sometimes referred to as a "friendly foreclosure".  So it is a foreclosure.  In that respect a short sale is usually better for your credit.  It's not uncommon for the lender to offer this.  Especially is they see the short sale taking a long time.

 

But it's your choice.  It seems you have a good grasp of the short sale now.  Stay on top of it and work closely with your Realtor.

 

Steele

Permalink Reply by Katerina Gasset on March 30, 2011 at 5:12pm
Yes, a deed in lieu is a foreclosure without going through the judicial process in judicial states. We are getting a lot more calls lately from our sellers on properties we have short sale offers on, wherein the bank is telling them they should do a deed in lieu instead of a short sale because there is less paperwork involved but never once telling what the ramifications to a DIL are. First of all, according to Fannie Mae guidelines, lenders are to report a DIL as a code 89 on the credit report. Code 89 means Foreclosure. A short sale is to be listed as code 13 which is paid in full or less than agreed. Of course the latter is not going to hurt as much as the 89. You can read more on the Fannie Mae website on how they manage cases after short sale versus after foreclosure.
Permalink Reply by Dan McHale on March 31, 2011 at 1:51am
Katerina/Steele - thanks for the post. Great information. My loan is owned by Freddie so I assume they are doing the same.
Permalink Reply by Dan McHale on March 31, 2011 at 1:53am

 

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