Question

What is the difference between short sale, foreclosure, and deed in lieu of foreclosure?

1) Short sale is when a property is sold for less than the amount owed on the mortgage, foreclosure is a legal process where the lender takes ownership of the property due to non-payment, and deed in lieu of foreclosure is when the borrower voluntarily transfers the property to the lender in exchange for release from the mortgage.
2) Short sale is when a property is sold for more than the amount owed on the mortgage, foreclosure is a legal process where the borrower takes ownership of the property due to non-payment, and deed in lieu of foreclosure is when the borrower voluntarily transfers the property to the lender in exchange for release from the mortgage.
3) Short sale is when a property is sold for the exact amount owed on the mortgage, foreclosure is a legal process where the borrower takes ownership of the property due to non-payment, and deed in lieu of foreclosure is when the borrower voluntarily transfers the property to the lender in exchange for release from the mortgage.
4) D. Short sale is when a property is sold for less than the amount owed on the mortgage, foreclosure is a legal process where the borrower takes ownership of the property due to non-payment, and deed in lieu of foreclosure is when the bank forcefully takes the property from the borrower.

Answer 1

A short sale occurs when a property is sold for less than the mortgage owed, foreclosure is the lender taking ownership due to non-payment, and deed in lieu of foreclosure is a voluntary transfer of property to the lender to avoid foreclosure.

Step-by-step explanation:

The terms short sale, foreclosure, and deed in lieu of foreclosure are all related to situations where a homeowner is struggling to keep up with mortgage payments. The correct answer to the student's question is:
1) A short sale is when a property is sold for less than the amount owed on the mortgage. In a short sale, the lender agrees to accept less than the full balance of the mortgage at sale to prevent a more costly foreclosure process.

2) Foreclosure is a legal process initiated by the lender in which the lender takes ownership of the property due to the borrower's non-payment. This is typically the last resort for the lender, as they would typically rather have the borrower continue to make payments on the loan.

3) A deed in lieu of foreclosure is a transaction in which the borrower voluntarily transfers the title of the property to the lender to be released from their mortgage obligations and avoid foreclosure.