Deed in Lieu of Foreclosure

With a deed in lieu of foreclosure, the property owner gives the property back to the lender (the “deed”) in exchange for the lender canceling the loan. The lender typically promises not to initiate foreclosure proceedings, to terminate any existing foreclosure proceedings and to forgive any deficiency (the amount of the loan that isn’t covered by the sale proceeds) that remains after the property is sold.  In today’s real estate market, many seller-carry lenders find  the buyer/borrower asking them to take the property back by means of a deed in lieu of foreclosure.  Whether doing so makes sense for the lender depends on many factors, including: value of the property, buyer/borrower’s over-all financial situation, amount remaining on the mortgage/trust deed, and whether the buyer/borrower has further encumbered the property since purchasing from the seller/lender.  If the property has no other encumbrances and substantial market value in excess of the amount outstanding on the note carried by the seller, a deed in lieu may be a good way for a lender to resolve the situation and avoid the cost of a foreclosure.  On the other hand, if the value is questionable, or if the buyer has created junior encumbrances, a deed in lieu may be a mistake for the lender. For more detailed information about deeds in lieu of foreclosure and other real estate law issues, call or visit our office today.

This entry was posted on Thursday, December 3rd, 2009 at 12:30 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.