Short Sale and Deed-in-Lieu

What is a short sale?

When a property is worth less than the value of the mortgage loan against the property, it is considered to be underwater. One way to get rid of an underwater property is to conduct a short sale. In a short sale, the homeowner, with the lender’s permission, sells the property for less than the balance of the loan.

In some short sales, it is possible to get the bank to forgive any deficiency. However, in some cases, sellers often have to bring money to the closing to get the final amount up to what is acceptable to the bank. Short sales have an additional risk: sometimes the sale fall through because the bank takes too long to approve the sale price –this can lead to buyers walking away from the deal,which can put you back at square one.

What is a deed-in-lieu of foreclosure?

A deed-in-lieu of foreclosure is when a bank agrees to take back a property without filing a foreclosure lawsuit. The homeowner signs the deed to the property over to the bank, and the bank agrees to accept the property in full satisfaction of the loan. In Maryland, there is a provision in the Maryland Mortgage Foreclosure Law that governs the deed-in-lieu of foreclosure.

Banks typically will only grant this if they own the only lien.  A second mortgage can be a deal killer. Homeowners are usually required to list the property for sale for 90 days and submit financial documentation to the bank to secure a deed-in-lieu.

What is the right to cure?

In Maryland, homeowners have a statutory right to cure any mortgage default  up until 1 business day before the foreclosure sale occurs. However, the homeowner must pay the loan in full by paying everything that is owed: principal, interest, cost of collection, the lender’s court costs, and attorney’s fees.

What is a foreclosure sale?

In Maryland, a foreclosure sale is the process by which a home is auctioned off by the lender after the mediation window is closed. Foreclosure sales are conducted on the steps of most Circuit Courts around the state.The foreclosure sale must be ratified by a judge to become final.

 

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