There are two options when foreclosure is an inevitability and you want to make the process as painless as possible. Short sales or a deed-in-lieu are two options that can save you from financial trouble.

Short Sale

A short sale involves selling your property for less than the amount you owe on it. While it doesn’t have to be with your lender, your lender must approve of it. Consider that in this situation, the borrower still has an obligation to pay back the remaining balance (unless there is a prearranged agreement with your lender). They may also require proof of financial hardship before a short sale is initiated.


The short definition of this term is voluntary foreclosure. In this case the borrower essentially gives up ownership of the property to the lender with their permission. Before this arrangement is settled, both parties must agree to a price equal to the market value. The borrower must also enter into this agreement voluntarily. What is beneficial about a deed-in-lieu is that it satisfies your debts and your credit score doesn’t take as much a hit than a true foreclosure.

What’s Best For Me?

If you’re worried how this affects your credit history, it will. But this doesn’t mean it will have a devastating effect. Credit score recovery relies on how the remaining balance is reported and how you rank with the other categories, such as amounts owed, payment history, types of credit, new accounts, and length of credit history. And since your missed payments have already lowered your score, it’s not likely a short sale or a deed-in-lieu will drop it much more, assuming the rest of your credit looks good.

If you’re struggling to make mortgage payments, it’s best to discuss options with your lender as soon as possible. Finding out what’s best for you depends on your situation.