Deed in lieu of foreclosure vs. short sale in Maryland

A deed in lieu of foreclosure is an agreement in which you sign the home over to your lender, and the lender agrees not to complete a foreclosure. A short sale is a market sale to a buyer, approved by your lienholders, when the net proceeds aren't enough to pay off what you owe. Both can be alternatives to foreclosure, and lenders often ask homeowners to try a short sale before they will consider a deed in lieu. For homeowners in Silver Spring, Germantown and across Montgomery County, our Options for Homeowners Facing Foreclosure page lays out the full range.

How a deed in lieu works

You ask your servicer for a deed in lieu through its loss mitigation department. The lender reviews your finances, orders a valuation and checks the title. Lenders generally want a clean title, which means a deed in lieu is harder when there is a second mortgage, a home equity line or other liens. If the lender approves, you sign the deed over, move out by an agreed date and leave the home in broom-clean condition.

How a short sale differs

In a short sale, the home goes on the market and you accept an offer from a buyer. The offer goes to every lienholder for approval. Because each lienholder can be paid something from the sale, a short sale can work even when a home has more than one loan against it.

Real Estate Search and Sale facilitates short sales: we prepare the package, request payoffs and follow up with each lienholder. You, or your representative, negotiate with the lender.

When each one tends to fit

A deed in lieu may be worth asking about when:

• The home has only one mortgage and no other liens
• The home hasn't sold after a fair period on the market
• You need a simpler process and the lender is willing

A short sale may fit better when:

• There is more than one lien on the property
• You'd like the home sold to a buyer of your choosing on a timeline you help set
• The lender requires a marketing attempt before it will consider a deed in lieu

Either way, ask your attorney to review the approval letter, including whether it addresses any remaining balance, and ask a tax professional how forgiven debt may be treated for you.

Help available in Maryland

Maryland homeowners can reach free, state-supported housing counseling through the Department of Housing and Community Development. Owner-occupants in a foreclosure case can generally request mediation through the court process. A counselor or attorney can explain the deadlines that apply to you.

Where we work

We help homeowners in Silver Spring, Wheaton, Germantown, Gaithersburg, Olney and throughout Montgomery County, as well as Frederick County.

Frequently asked questions

Will my lender offer a deed in lieu?
Some do, and many ask for a short sale attempt first. Your servicer's loss mitigation department can tell you what it offers.

Can I stay in my home during a short sale?
Yes. You live in the home while it's listed and move after closing.

Can I still keep my home instead?
Possibly. Ask your servicer about loan modification or a repayment plan, and talk with a housing counselor.

Do you handle the legal paperwork?
No. We handle the real estate side and work alongside your attorney.

Talk with us

Broker Carolyn Thompson holds the CDPE and SFR designations and has more than 20 years of experience. Visit our Options for Homeowners Facing Foreclosure page or call our 24-Hour Appointment Desk at 202-630-5070. A list of references is provided on request.

Related reading: Short sale vs. foreclosure in Maryland and What is a Certified Distressed Property Expert (CDPE)?.

References are available on request. Real Estate Search and Sale, LLC · 24-Hour Appointment Desk: 202-630-5070 · Open 24 hours. Equal Housing Opportunity.