Deed in Lieu: Is it Right for You?

questionPhoto courtesy of Stefan Baudy

If you are like many millions of Americans and are currently struggling to pay your mortgage bill each month, you are probably weighing the pros and cons of all of your options. Hopefully, you have already met with a reputable financial advisor or a credit repair attorney. If you have gotten the advice of one of the aforementioned professionals and, with their help, have determined that you simply just cannot afford to stay in your home, you may be considering putting your home up for a short sale, or perhap you are looking into doing a deed in lieu of foreclosure (DIL).

Instead of marring your incredibly important credit score with a foreclosure or bankruptcy, going through with a short sale or a deed in lieu of foreclosure are two other options that most people feel look better on your credit report. A short sale requires that you go through all of the steps necessary in selling a home, which can be costly and time consuming. On the other hand, the processing of a deed in lieu of foreclosure may simply result in you signing the title over to the lender and allowing the lender to sell the home for you.

In what has now become a long and drawn out housing crisis (even with the small recent upturn) more and more distressed homeowners are turning to the age old method of what is often simply referred to as ‘deed in lieu.’ Popular in the 1920s and 1930s, a ‘deed in lieu’ allows homeowners to more or less hand over the property to the lender and find more affordable housing without an extremely negative deficiency judgment weighing on them and marring their credit scores indeterminedly .

Most banks and other mortgage lenders report preferring a short sale over a deed in lieu, because even though lenders will end up taking less than what is owed on the house, everything is taken care of and they don’t have to worry about putting the home up for sale, which will end up costing them more time and money. However, a homeowner who is really floundering under water with a property with no liens is a good candidate for a deed in lieu of foreclosure.

The average lender is hesitant to take on a property that has liens against it, such as a second or third mortgage, because they then become responsible for said liens.  Lenders will, however, entertain a deed in lieu of foreclosure for distressed homeowners who have put their home on the market with a sale price that would cover the entire amount they owe on the home.  If this method has proved unsuccessful, lenders look for homeowners who have attempted a short sale next. This process of events shows the lender that the debtor has done his due diligence in attempting to sell the property, and at this point, the lender may entertain a deed in lieu.

If you are interested in learning more about what is involved in filing for a deed in lieu of foreclosure, Veitengruber Law is here to help educate you on the process.  We’ll make sure that your best interests are met. Call our office today and ask us for our first available appointment so that we can get you on the way to affordable housing as soon as possible.

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One Response to Deed in Lieu: Is it Right for You?

  1. Pingback: My Bank Won’t Accept a Deed in Lieu of Foreclosure | Veitengruber Law

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