Which option is better for my credit, short sale or deed in lieu?

Both affect credit, and the exact impact depends on how the lender reports it, but many homeowners prefer a short sale because it can look more favorable to future lenders than a completed foreclosure or deed in lieu.

Will I still owe money after a short sale or deed in lieu?

Possibly, unless the lender agrees in writing to waive the deficiency. This is one of the main things a real estate attorney negotiates before the sale or deed transfer is finalized.

Can I do a deed in lieu if I have a second mortgage?

It's harder. Most lenders want the property free of other liens before accepting a deed in lieu, so a second mortgage or HELOC usually needs to be resolved or negotiated separately first.

Short sale vs deed in lieu: comparing your foreclosure exit options

When keeping the home isn't realistic, the choice usually comes down to a short sale or a deed in lieu of foreclosure, and the two work very differently even though both aim to avoid a completed foreclosure judgment.

A short sale means listing and selling the property for less than what's owed on the mortgage, with the lender agreeing to accept the proceeds and typically release the remaining debt. It requires finding a buyer and getting lender approval on the sale terms, which can take time, but it often leaves the seller in a better negotiating position on any deficiency balance.

A deed in lieu of foreclosure skips the sale process entirely: the homeowner signs the deed over directly to the lender in exchange for being released from the mortgage obligation. It's generally faster and avoids the uncertainty of finding a buyer, but not every lender will accept one, particularly if there's a second mortgage or other lien on the property.

A real estate attorney handles the negotiation with the lender in either path, including pushing for a full release of any deficiency and reviewing the tax and credit consequences before anything is signed.

What it costs

Short sale negotiations sometimes have the attorney's fee built into the closing costs or covered as part of the lender-approved settlement, while a deed in lieu is typically a more contained transaction with a flatter fee. What moves the cost is whether there's a second mortgage or other lienholder involved, since each additional party the attorney has to negotiate with adds time.

Top 3 by our score

Ranked from our published scoring of public Google reviews for real estate & property law.

1. Aloia | Roland | Lubell, PLLC
4.8★ · 160 reviews

90
2. ZinnLaw
5.0★ · 75 reviews

89
3. Burandt, Adamski, Feichthaler & Sanchez, PLLC
4.8★ · 203 reviews

89

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FAQ

Which option is better for my credit, short sale or deed in lieu?: Both affect credit, and the exact impact depends on how the lender reports it, but many homeowners prefer a short sale because it can look more favorable to future lenders than a completed foreclosure or deed in lieu.
Will I still owe money after a short sale or deed in lieu?: Possibly, unless the lender agrees in writing to waive the deficiency. This is one of the main things a real estate attorney negotiates before the sale or deed transfer is finalized.
Can I do a deed in lieu if I have a second mortgage?: It's harder. Most lenders want the property free of other liens before accepting a deed in lieu, so a second mortgage or HELOC usually needs to be resolved or negotiated separately first.

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