Deed in Lieu of Foreclosure

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If the person you offered residential or commercial property to on an owner finance loan no longer wants the residential or commercial property or can no longer pay for the residential or commercial property, a Deed in Lieu of Foreclosure may be a good alternative to take the residential or commercial property back and cancel the loan.

If you have a protected property loan, and the person who owes you the money does not pay the loan, you may need to foreclose your lien by offering the residential or commercial property at public auction. The money received at the auction is used to the loan.

A foreclosure can be pricey and might result in a claim or personal bankruptcy.

Good to understand: An alternative to a public auction foreclosure is a Deed in Lieu of Foreclosure. The customer merely moves the residential or commercial property back to the lender and the lender cancels the financial obligation. This is in some cases referred to as a "friendly foreclosure" or a "voluntary foreclosure." It can prevent claims and insolvency.

Basically, the debtor simply offers the residential or commercial property back. The customer signs a Deed in Lieu of Foreclosure, offers you the secrets and vacates.

Note: Keep in mind, that a lot of mortgage business will decline a Deed in Lieu of Foreclosure. If you owe money to a mortgage company, a Deed in Lieu is rarely an option. Regulations might need a mortgage company to foreclosure even though the Borrower no longer wants the residential or commercial property and does not reside in the residential or commercial property any longer.

On the other hand, if you owe money to a pal, member of the family, or a private lender, you may have the ability to move the residential or commercial property back to the lending institution and cancel the debt utilizing a Deed in Lieu of Foreclosure.

But all celebrations, Lender and Borrower should agree. The loan provider must concur to accept the residential or commercial property AND the borrower need to concur to transfer the residential or commercial property, return the secrets, and vacate the residential or commercial property.

Without this mutual arrangement, there can be no valid Deed in Lieu of Foreclosure. A Borrower can not merely send by mail the mortgage business a Deed in Lieu of Foreclosure and expect the loan to be canceled.

A Customer may acquire a Deed in Lieu of Foreclosure, sign it and mail it, but the mortgage company has the right to contradict the deed and continue with the foreclosure and expulsion process. It is a waste of money for a Borrower to pay for a Deed in Lieu of Foreclosure without first getting the Lender's written consent.

Good to understand: Private lenders might prefer a Deed in Lieu of Foreclosure due to the fact that they get the residential or commercial property back rapidly without threat of being taken legal action against or having the borrower file insolvency. In this case, the Borrower should let the Lender prepare and pay for the Deed in Lieu of Foreclosure.

Borrowers usually choose to utilize a Deed in Lieu. It may keep the loan default off of their credit reports and it may prevent an expulsion. The Borrower and Lender can merely agree on an orderly relocation out of the residential or commercial property.

Good to understand: Sometimes the parties might accept convert the loan to a rental agreement. The Borrower transfers the residential or commercial property back to the Lender and then leases it from the Lender.

deed in lieu

The term "Deed in Lieu" is simply a shorter method of saying Deed in Lieu of Foreclosure. Homeowners consent to sign a deed in lieu to avoid foreclosure. When a seller accepts this deed, the property owner is no longer obliged to pay back the mortgage.

What is Deed in Lieu of Foreclosure

A Deed in Lieu of Foreclosure is a complicated document and must be prepared by a lawyer. This is an official legal document utilized to give up real estate residential or commercial property from the Buyer back to the Lender or Seller.

A copy of the Promissory Note and Deed of Trust which was signed by the Borrower and which is being canceled will both require to be described in the Deed in Lieu of Foreclosure.

By signing the Deed in Lieu of Foreclosure, the Borrower is legally moving title to the residential or commercial property back to the Lender in exchange for the cancelation of the unpaid balance owed on the Promissory Note protected by the residential or commercial property.

By accepting the Deed in Lieu of Foreclosure, the Lender is legally accepting the residential or commercial property as payment in full of the unsettled balance due on the promissory note.

Deed in Lieu of Foreclosure in Texas

Using a Deed in Lieu of Foreclosure in Texas, the Lender keeps the right to carry out a "Friendly Foreclosure" after accepting the Deed in Lieu if other liens are discovered on the title to the residential or commercial property. These other liens might be 2nd liens, home improvement liens, judgment liens, kid assistance liens and tax liens.

If other liens are discovered on the title to the residential or commercial property, the Lender with a Deed in Lieu of Foreclosure retains the right to foreclosure its lien on the residential or commercial property which must "wipe out" or remove any liens submitted after the Lender's lien

Other liens might consist of the following:

Federal Tax Liens
Judgment Liens
Mechanic's Lien
Home Equity Liens

Even if a foreclosure is required after the Lender accepts a Deed in Lieu to get rid of liens or clear title, the charges for the foreclosure ought to be substantially less since the Borrower has concurred not to contest or otherwise challenge the foreclosure. Also, the Borrower ought to not be able to apply for Federal Bankruptcy Protection to stop the sale of the residential or commercial property.

A contested foreclosure on a loan not owned by a mortgage business may cost approximately $1500 or more. If the Borrower submits a claim to stop the foreclosure, or declare Federal Bankruptcy Protection, the legal costs along could skyrocket, plus the Borrower will remain in the residential or commercial property without spending for the residential or commercial property.

A Deed in Lieu of Foreclosure costs $350. County recording fees are normally about $38.

Deed in lieu of foreclosure gotten ready for $350

Do you have questions about a Deed in Lieu of Foreclosure? Email attorney Scott Steinbach straight at scott@texaspropertydeeds.com. Or call 972-960-1850.

R. Scott Steinbach is licensed in the state of Texas. Board Certified by the Texas Board of Legal Specialization in Residential Real Estate Law. AV Preeminent ranked by Martindale-Hubble. Peer ranked for Highest Level of Professional Excellence.