Deed-in-Lieu of Foreclosure

The last alternative to avoid foreclosure.

A deed-in-lieu involves the homeowner signing over their home’s deed to their mortgage lender in exchange for the lender not foreclosing on the home. This is usually considered a very last alternative. 

This sounds ideal to most distressed homeowners; they hand over the deed to the mortgage lender and walk away problem-free. 

But the truth is that lenders will usually not accept a deed-in-lieu until after the homeowner has tried a short sale. In other words, the mortgage lender would rather have the homeowner pay their mortgage than foreclose on the home. 

Lenders are in the lending business; not in the home buying and selling business. 

In short, lenders do not want to waste their time and money on selling a property they foreclosed on. Only after all else fails, the lender may accept a deed-in-lieu. Or they may even decide to move forward with the foreclosure; it all depends on the situation and the lender.

Common questions about Deed-in-Lieu of Foreclosure

Is a deed-in-lieu better than a foreclosure for my credit?

Yes, this is the case most of the time.

How do I deed my property to the bank in lieu of foreclosure?

You must call the bank and ask them for the appropriate paperwork. You must submit it and have them approve it.

How much does deed-in-lieu of foreclosure cost?

Filing directly with the lender shouldn’t cost anything. You may have to pay for the notary when you sign the deed.

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