How Does Deed in Lieu of Foreclosure Affect My Credit?
1:30 pm ET
February 10, 2011 May 21, 2015
Q: We bought our home in West Virginia six years ago and we plan on retiring to Texas in about a year. Our home is upside down by half the amount we paid! There are several homes in the neighborhood that have been for sale for more than a year. I am very worried there is no way we will be able to sell our house. One neighbor worked out a deed in lieu of foreclosure with his bank, I know a couple have gone to foreclosure also. We cannot stay here in West Virginia, so what is our best bet for getting out of this house? How does a deed in lieu of foreclosure or a short sale affect our credit? – Mrs.
Sunny Demko is a Realtor with Keller Williams in Cuyahoga City, OH.
A: If your house is worth less today than what you owe the bank, you will have a hard time selling your house and getting the amount you need to cover your loan balance. Those that do a short sale and successfully get the bank to agree to take the new offer, even though it is less than what they owe the bank (hence the term ‘short sale’), are unable to buy again for at least a two-year period given their drop in credit score. For some it could be a drop of at least 50 points or much higher for others. A short sale is still the best option as opposed to letting it go into foreclosure.Source: www.realtor.com