Owning Distressed Real Estate

1. Sell the PropertyBest Option if You Still Have Equity

• Traditional Sale – List it on the market with an agent. May work if time allows and the property is still in decent shape.
  
• Investor/Wholesaler Sale – Fast cash offers, often as-is, and can close quickly.
  
• Auction Platforms – Sites like Auction.com or Hubzu help offload distressed properties.
  

Make sure you account for back taxes, liens, or repair deductions when calculating your net proceeds.

2. Short SaleUse if You Owe More Than the Property Is Worth

• You sell for less than the mortgage balance.
  
• Requires lender approval.
  
• Avoids foreclosure, but may still hurt your credit—less than foreclosure usually.
  
• You’ll need:
  
  • A hardship letter
    
  • Proof of financial distress
    
  • A willing buyer
    

3. Deed in Lieu of ForeclosureVoluntarily Transfer Ownership to Lender

• You give the property back to the lender to settle the debt.
  
• Avoids public foreclosure.
  
• Can still impact credit, but often better than foreclosure.
  
• May be eligible for relocation assistance.
  

4. Loan Modification or ForbearanceIf You Want to Keep the Property but Need Time

• Renegotiate your loan terms for lower payments or temporary pause.
  
• Requires proof of hardship.
  
• Might buy time to sell or recover financially.
  

5. Let It Go to Foreclosure (Last Resort) Only If Other Options Fail

• You stop making payments, and the lender takes legal action to reclaim the property.
  
• Major credit damage (can last up to 7 years).
  
• You may still owe a deficiency judgment in some states (if sale doesn’t cover mortgage balance).
  
• Could result in eviction.
  

6. Bankruptcy (if multiple debts involved)

• Chapter 13 may allow you to reorganize and keep the home.
  
• Chapter 7 could discharge unsecured debt and surrender the property.
  

Additional Tips:

• Consult a real estate attorney or HUD-approved housing counselor.
  
• Communicate early with your lender—they may offer programs to help.
  
• Avoid scams promising fast relief or loan modifications for upfront fees.