While a deed-in-lieu of foreclosure might sound like a simple solution to homeowners facing foreclosure, this really provides them with little benefit.

The lender wins hugely. They get the property back quickly and cheaply and do not have to worry about legal fees or fighting a foreclosure defense.

So why is this happening? Despite the size and the length of the foreclosure crisis, there is still a dearth of accurate and useful information to help those facing foreclosure. At least, it is not getting to those who need it.

Homeowners are not sure where to turn. Everybody was hoping to get a principal reduction on their mortgage. Obama’s loan modification program was touted by many as a solution to this crisis. Homeowners are now discovering that they were not able to qualify for the much heralded loan modification schemes and are letting their homes go.

So what is the problem with doing a deed-in-lieu of foreclosure?

The homeowner could still get stuck with a deficiency judgment, unless they qualified under HAFA or got the lender to provide full satisfaction of the total amount due. Despite a lot of belief to the contrary, a deed-in-lieu could hurt your credit as much as a foreclosure. Thus, it could stop you buying again for five or more years.

Homeowners should first consider doing a short sale. A short sale has less impact on your credit, according to most experts, because it shows you were taking action. It also allows you to buy again after two years. Finally, it will be much easier and quicker to rebuild your credit, which could also save you thousands of dollars in car payments.

A word of warning, however – make sure that in the negotiation for a short sale, you get the bank to give you a full payoff so that you do not get stuck with a deficiency judgment or a promissory note. It is also wise to find someone with a successful track record to make sure that all goes according to plan.

In summary, in a short sale, the homeowner can sell the property at a low price in order to get it sold fast. This enables them to get on with their life, fix their credit and be eligible to buy another home in as little as two years. If they buy again, their mortgage will probably be half what it was before.

Instead of visiting the online websites of realtors or flipping through their brochures, place your focus on foreclosure properties. Foreclosure properties are often considered a great buy, as they are easy to find and affordable. One of the most popular ways that foreclosures are bought and sold is at an auction. This auction typically takes place at a county, town, or village government office, such as the clerk’s department. As for how you can find these foreclosure auctions, they are often advertised in local newspapers. You can also search local records, as foreclosures are public notice.

One of the few downsides to buying a home at a foreclosure auction is the inspection, as you aren’t typically granted one. Most bidders are bidding on the home as-is. As-is isn’t so bad, but it may be if you haven’t seen the property. With that said, since foreclosures are public notice, you should be able to get the address of the property in question. You will want to drive by. Although you should not judge a book by its cover, a drive by can give you an idea of what to expect. When you have doubts, it may be best to move on and target other auctions.

The last thing you want to do is just show up, if you decide to attend a foreclosure auction. That is unless you are scouting to see how an auction works. When you are serious about purchasing a foreclosed property at an auction, you need to be prepared. This preparation involves having financing lined up. Many will require that you either have the money on hand or show proof that you do have the financial resources needed to follow through with the sale. Contingency loans are generally prohibited. Check deposits are sometimes required before you can even place a bid.

As for the auction itself, it depends. It is not uncommon for bids to be sealed. Once everyone has placed a bid, the highest bidder will be announced. For bids that are not sealed, the auctioneer will start with a figure, often around $1,000 or less and the bidding will continue on. If you are the winner bidder, it is important to know that you may not be able to move into your new home right away. In fact, it is likely that you will be unable to do so. Many states give current occupants a redemption period or a grace period. This is where they can still fight to keep their home.

As it was previously stated, you may want to attend a foreclosure auction and just sit on the sidelines. You should be allowed to do so. If you are unfamiliar with the buying and selling of real estate, foreclosures, or auctions, you can learn a lot. This knowledge is important, as many fellow bidders will be investors looking to turn a profit, not buy their first home.