Unloading Your Home during a Foreclosure - dummies

Unloading Your Home during a Foreclosure

By Ralph R. Roberts, Lois Maljak, Paul Doroh, Joseph Kraynak

If you can’t save your home during an impending foreclosure process or sell it for a profit or to break even, then unloading your home may be your best option — cut your losses, load up your family and your belongings, and hit the road, Jack.

Following are some ways to ditch your home when all else fails:

  • Deeding the house to your bank in lieu of foreclosure: Your bank may agree to forgive your debt in exchange for the deed to your home and the keys. You move on without the drama, time, money, and hassle of foreclosure, and the bank gets the property without costly attorney fees and having to wait several weeks or months to place the home on the market.

    When offering a deed in lieu of foreclosure, make sure the bank provides you with a formal release of all obligations for repaying the debt. Otherwise, the bank may be able to file for a deficiency judgment if the house sells for less than what you owe on it; you’re then responsible for paying the difference. Read the agreement and have your attorney review it and explain it to you before you sign anything.

  • Selling the house to an investor: If you can’t possibly afford to rehab your home to bring it up to market standards and then sell it for a profit, an investor may be able to. An investor can often negotiate a short sale with your creditor that the creditor is unwilling to offer you. An investor may even be able to give you a little money to cover your moving expenses. Before pursuing this option, consult a real estate agent or an attorney with experience in foreclosure; you don’t want to sell your home for pennies on the dollar if you can sell it for a profit and keep the cash yourself.

  • Moving out and leaving the keys: What should you do if you can’t sell your home (even to an investor), the bank won’t accept a deed in lieu of foreclosure, and you have no other options? Your best option may be to live in your home for as long as the law allows and save your money for the eventual move. In areas that have a lengthy redemption period, you can squirrel away a lot of cash over the course of several months.

You can often score some additional cash by negotiating a cash-for-keys deal with your bank or the investor who purchases your property. You agree to vacate the premises on a certain date without trashing the place, and the bank or investor agrees to pay you for moving out early. You usually get a percentage now and the rest when you move out.