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Information on Surrendering Your Home

Please give me information regarding surrender of my property due to financial difficulties.

Could you please give me information regarding surrender of my keys on my property due to financial difficulties and what are the steps to follow.

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Bill's Answer
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Bills.com | Find Learn Save

The voluntary surrender of a home in the manner you describe is often referred to as a “deed in lieu of foreclosure” in the mortgage industry. In this procedure, a borrower negotiates with the lender to turn over the deed to the lender in order to avoid formal foreclosure proceedings in the court system. I generally recommend negotiating a deed in lieu agreement when a homeowner can no longer afford his mortgage payments, has explored all other options to save his home, and when foreclosure is imminent. Before you consider surrendering the property to your mortgage lender, you should do everything in your power to sell the home. If you can find a buyer, you should be able to rid yourself of the home without the credit damage caused by a foreclosure or a deed in lieu. For further information about foreclosure, you should review the foreclosure information from the US Department of Housing and Urban Development Avoiding Foreclosure page.

Unfortunately, in the current housing market, many homeowners find themselves owing more on their mortgages than their homes are worth, a situation which the mortgage industry refers to as being “upside down” on a mortgage. Even if you cannot find a buyer willing to pay enough for the home to pay off what you currently owe, you still may be able to sell the property for less than the mortgage balance, though you will need to negotiate an agreement with your lender to accept less than the balance of the note to pay off the mortgage.

Selling a home for less than the balance owed on the mortgage is often called a “short sale.” Such transfers must be approved by the lender prior to the sale. Lenders that agree to short sales will frequently forgive any balance remaining on the note after the sale proceeds are applied, though they usually require borrowers to provide documentation of financial hardship, such as job loss or unexpected illness, before they will approve a short sale. If you are interested in a short sale, the first step is to contact your mortgage lender to find out if this is an option. You can only proceed with a short sale with the consent of the mortgage holder, so it is imperative that you communicate with the lender.

Speak with a qualified attorney before making any decisions regarding your home, as your state’s laws could significantly affect how you decide to resolve this problem.

To learn more about the foreclosure process, and possible ways to prevent foreclosure, I encourage you to visit the Bills.com Foreclosure page.

I wish you the best of luck in resolving your financial difficulties.

I hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill

Bills.com

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2 Comments

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  • JG
    Apr, 2011
    Jo
    Castle Hill, TX
    Thank you for info. I have had a difficult time finding someone to refinance my mortgage due to a drop in value.I currently have the house up for sale and hope I can get it sold. Meanwhile my payments have gone up by 400 dollars making it very hard to continue payments. I may need to consider a short sale offer to my lender.
    0 Votes

    • BA
      Apr, 2011
      Bill
      I see four options for you:
      1. Continue with the status quo. In other words, keep making your monthly payments.
      2. Sell the property under a short sale or deed in lieu of foreclosure. Consult with your mortgage servicer to explore this option.
      3. Investigate an FHA short refinance.
      4. Consider a strategic default.

      Click on the links I just mentioned to find the Bills.com resources that discuss these options. If you want to keep the house, options No. 1 and No. 3 are your choices. The fourth option, strategic default, is the least desirable from liability and credit score perspectives.

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