Deed in Lieu of Foreclosure

Deed in lieu of foreclosure is a process in which the owner of real estate voluntarily signs over their property to the lender to avoid foreclosure. It is typically done in situations where the loan amount far exceeds the value of the property, and the property owner wants to just “walk away.”

 Advantages of a Deed in Lieu of Foreclosure

 A deed in lieu of foreclosure can offer several advantages to both the property owner and the lender. The aim, for the property owner, is to have the lender waive any “deficiency” from the sale of the property. A deficiency is the amount left unpaid on the loan after the property is sold for less than what is owed. In many situations, lenders consider this to avoid the time and money of the foreclosure process.

 Most lenders have strict qualifications for a deed in lieu of foreclosure, and it is not something property owners can typically accomplish without the help of an experienced professional. The process can be long and burdensome and always includes specific action.  Property owners attempting to negotiate on their own behalf simply don’t have the time and industry expertise to follow through.  It is not uncommon for the lender’s lawyers to ignore unrepresented property owners.

 Deed in Lieu Process

 The process begins like other negotiations, the borrower must complete and submit a financial package with documentation relating to income, expenses, assets and debts. The financial package submitted must tell the borrowers story on paper in a compelling manner including the circumstances which led to the inability to afford payments.  The lender then schedules a comprehensive inspection of the property.  With the fact finding complete, the lender either accepts the offer, declines the offer or counters with its own offer.  The right professional knows the market and can work to ensure the final terms are appropriate for the type of property and the local market.