Basically, a deed in lieu of foreclosure is the action a homeowner takes to give his/her house back to the lender in exchange for being forgiven the debt of the mortgage.  When considering a deed in lieu, be sure that the lender will accept it, and get the acceptance in writing.  As part of the written agreement, have the lender agree to forgive any amount that is not covered when the house is later sold by the lender.  Some experts believe that a deed in lieu looks better on a credit report than a foreclosure. 

 

From a lenders perspective, this is an act of last resort because banks really do not want property that needs to be maintained and hopefully resold.  The banks really want cash so they can continue to issue loans. Some lenders require that the house be placed on the market for at least three months in a good faith effort to sell it.  Many lenders will not consider a deed in lieu if there are other liens on the property. 

 

Another issue to cover in detail with the lender is to see how the lender will deal with the outstanding balance due.  Will the debt be forgiven or will the lender provide, in writing, assurance that it will not sue the homeowner for the balance at a later date.  Some lenders will keep the mortgage and not cancel the debt until the property is resold.  Be sure you know all the details of any agreement concerning the mortgage, your debt and what the lender is, in fact, agreeing to.

 

A short sale is preferable to a deed in lieu because in a short sale, the bank has agreed to forgive the difference between the sales price of the home and the amount owed to the bank, and the property is sold outright, freeing the homeowner from further obligation to the bank.  A short sale also frees up funds for the bank to lend instead of having to manage a piece of real estate.

 

As with short sales, it is wise to determine the impact a deed in lieu may have on your tax obligations before entering into any agreement.

 

For legal advice, consult a real estate attorney in your area. 

 

To learn more about short sales or other solutions to your real estate issues, visit www.EquityOptionsGroup.com or visit www.YourHouseOptions.com.

 

Remember, you have options.

 

Call Gwen at 727-939-1515 or Doug at 727-741-4189.

Or email [email protected] or [email protected]