When homeowners move forward with a deed in lieu of foreclosure, they strike a deal with the lender to hand over the deed to the property in exchange for the mortgage lender discontinuing foreclosure proceedings and cancelling the loan. Once the mortgage lender has the deed, it can arrange for the sale of the house to offset the loan.
There are advantages and disadvantages to a deed in lieu of foreclosure, and the decision to pursue this should be made after consultation with our experienced attorney and staff. While the deed in lieu of foreclosure is noted on the homeowner’s credit report, it is a more favorable notation that one of foreclosure. In addition, the deed in lieu would halt the foreclosure proceedings if they have begun, and end a long-protracted wait for the homeowner to lose his home.
The primary advantage of a deed in lieu is that the homeowner does not have to go through the trouble of having to arrange the sale of the home or find a “qualified buyer” as would be required in a short sale situation.
As with short sales and foreclosure sales generally, if the house is sold for less money that is owed in the loan, the mortgage lender may require the homeowner to pay the difference, which is known as a deficiency. However, at Tadross Law, we may be able to have that deficiency waived.