I have 2 rental properties both of which are in danger of being forclosed. I have trid to sale and to rent to them to no avail. I have heard of deed in Lieu of foreclosure. How does this work? I do own one other property which has some equity. Will bank take deed in lieu of foreclosure and forgive any remainging debt or will they go after me for any shortage?
Thanks for the responses so far.
I have the properties on the market and have had no offers. Even willing to sell $20,000 below what I paid which will be a net lose of $40,000.00 There are a ton of similar properties on the market, very few are actually selling and more are coming on the market. I have run out of cash. This looks and feels like doom.

I own property that I do not live in, someone else does. I’m responsable for the mortage, but since I’m the owner it reflects badly on me. I can’t afford to pay the mortage on my own. I don’t know if I should foreclosure or deed-in-lieu foreclosure.

The mortgage company just started foreclosure and today i asked if i could do a deed of lieu. My house has been up for short sale since august. The person i spoke to today said i couldnt do one now cause foreclosure already started and that i would recieve a w-99 (i beleive is what it is.) for the full price of the remaining balence due on the house. I know im being played for stupid. Anyone know what i should do ? how can i get them to work with me? I also live in missouri.

I had read that the biggest hit to ones credit with a deed in lieu or short sale is during the late/non-payment period. I am current on all my payments so will that help me in the long run if one of those 2 is approved by my lender?

My house has been on the market for a year, but is difficult to sell, because it needs work. I can’t afford to do the work on it, and I can’t afford to keep making the payments. The lender will consider a short sale, but the only offers are way below the market value. The lender will not consider the option of a deed-in-lieu. I really don’t want them to foreclose, but I seem to be out of options. Is it practical to ‘let’ them foreclose on it if there is no other way out?

Recently lenders have been taking deeds in lieu of foreclosure from homeowners to resolve foreclosures. The lender simply accepts a deed in exchange for forgiving the homeowner of his mortgage or deed of trust loan.

Let’s look more closely and see the ramifications of this legal transaction. It usually starts after the homeowner has fallen behind on his loan payments and is considering foreclosure, or he has already been served with a “default notice”. Time is against the homeowner because the lender will or already has started foreclosure proceedings. The homeowner is being bombarded by outside information sources because his foreclosure has become a part of the public record or he is getting information from well-meaning but uninformed people.

As soon as the homeowner notifies the lender of his impending problem or

his loan is delinquent, the lender orders an appraisal or BPO (Broker’s Price Opinion) to determine its market value. The lender now knows if he can make money on the property if he takes it back at a foreclosure auction. The lender’s decision will be strictly financially motivated from this point forward. The risk of taking the property by foreclosure includes the higher legal costs, an extended loss of interest on the loan, real estate market risk, realtors®’ commissions, and any other open liens on the property that can’t be extinguished at the auction. The lender now factors in the minimal cost and shorter time required to get the home by taking a deed from the homeowner but in lieu of continuing the foreclosure. If the appraisal comes back with a value of 80% or less of the loan balance due, the lender would be irresponsible to take the deed and would continue the foreclosure. The other determining factor is whether there are other liens against the property such as a second mortgage or mechanics liens. Sometimes these liens can be larger than the first mortgage and the lender will not accept the property with these liens still attached to it.

If the lender agrees to accept a deed in lieu of foreclosure, it is not completely over for the homeowner. The lender will submit an Acceptance Agreement that the homeowner must sign as well as a new deed. The terms of this agreement may stipulate that if the lender sells or transfers the property for less than what is owed on the loan (including all penalties, interest, and attorneys’ fees), the guarantor of the loan will owe the lender this difference. This deficiency amount can then be granted by the courts as a deficiency judgment against the loan guarantor.

So is the “Deed in Lieu of” an ideal solution for a homeowner in foreclosure? Not unless the terms of the Acceptance Agreement release the guarantor from future liability (deficiency judgment). Another option is to sell the property at a break-even point and repay the loan then his credit report won’t be negatively impacted by the lender’s reporting a loan write-off as with the deed exchange.

1. In come cases, the borrower must attempt to sell the home for its fair market value for at least 90 days before the lender will consider this option.

2. This option may be unavailable if there are other liens on the borrowers home, such as judgments from other creditors, second mortgages, or tax liens.

Advantages of a Deed in Lieu:

o Possible tax considerations, talk to your tax accountant about the 1099 ordinary income for the gift of forgiven loans, as well as the insolvency exceptions.

o Problematic option if you have a 2nd or 3rd loan, line of credit secured by the property. Although the 1st lien holder of the property may agree to a deed-in-lieu of foreclosure the subsequent lien holder have not. The subsequent lien holder loans can become unsecured debt that is attached to and stay with the borrower to pay off.

Example of a Deed in Lieu:

Sam lost his job, and after 2 months of attempting to find employment, decided he would move to another state. Sam called the lender to advise them of his situation. Sam decided to sign over a deed in lieu. In exchange, although months later the property sold for $69,000 less than the mortgage owed, the lender did not submit a 1099 tax statement for the difference. This saved Sam thousands in additional income, which would have been added in to his taxes.

K. Patrice Williams has a BA in Economics as well as a law degree. She has successfully managed both residential and commercial multi-million dollar income producing assets and budgets for more than 10 years. As a 1st year law student, Patrice established a real estate development and consulting business and acquired over 30 rental properties. As the housing market values decreased- like millions of other Americans-her properties were negatively impacted by shifting ARM’s, combined by a sluggish economy. Patrice has researched and personally implemented almost all of the pre-foreclosure techniques detailed in the book: “6 Simple Steps to Avoid Foreclosure”. http://www.avoidforeclosuremanual.com

I am often asked why a lender wouldn’t take back a deed in lieu of foreclosure when the homeowner offered his deed to the lender before he went into foreclosure. The lender will not consider a short sale or a deed in lieu of foreclosure until the homeowner is at least 90 days late on his mortgage or deed of trust payments in most states. In some states like Georgia, the foreclosure period is only 30 days so check what your state’s foreclosure laws are before assuming anything or listening to anyone who is not an attorney.

Assuming you waited the mandatory 90 days to go into foreclosure as the lender requested, you next approach the lender and ask how to send him your deed. As soon as you were 60 days late, the lender has pulled your file and has started looking at the fair market value of your property to determine if they have an interest in taking your property back by your deeding them the property or if they need to continue the foreclosure.

The determining factors are both the market conditions in your area and the junior liens against your property. For example, if there are many foreclosures in the area as in Florida, California and Arizona, the lender may or may not want your deed back, especially if HOA (Homeowners Association) fees are also not being paid. Most states have limited the HOA fees to six months payment no matter how many months behind the homeowner is when the lender gets the property back.

The lender will even pay the property taxes without having a deed to the property because they don’t want to have a senior lien (property taxes) come in ahead of their senior mortgage or deed of trust. So the lender will protect his first mortgage position against the property so his mortgage isn’t “extinguished” at the auction sale. But if there are other junior liens against the property such as a second mortgage, HELOC (equity line), mechanic’s liens, or other loans or liens junior to the first mortgage, the lender will never take back a deed in lieu of foreclosure. He would never do this because he would be accepting the responsibility of paying off these liens before the property’s title could be sold or transferred.

The only viable alternative for the lender is to go through the foreclosure process and go to the foreclosure auction to buy the property with all the junior liens extinguished. When the auction is completed, the lender will get a title free and clear of junior liens and encumbrances. There could still be other lines that take precedent over the lender’s first mortgage but these would have to have been extinguished anyway.

The reason a lender will not take a deed in lieu of foreclosure from a homeowner in foreclosure is purely an economic decision – simply if it benefits the lender, the lender will take the deed. If however, taking the deed gives the lender more liability, the lender will never take back a deed from the homeowner. Ironically, anyone looking to buy a pre-foreclosure property is generally very much better off to buy it as an REO (real estate owned) from the lender because the issues and problems will be solved before the property is sold to a buyer. Also, REO’s are a greater financial burden on the lenders and are most often sold well below what is the final judgment amount from the court.

Timeshare in Orlando and have been offered a deed in lieu of foreclosure to get rid of this bad deal. They want to charge before I can see documents or information. Is this normal?
They insist on a credit card for the $750.00 for the deed back documents before they are sent.

I had a shortterm financial problem and my loan payments got behind. I can’t seem to get any interest from buyers, house is in the low price bracket but in good order, trouble is there is plenty around the area to choose from. I don’t want to sell but will face a longer term problel financially if I can’t lower the payments on one or both mortgages.
If I can’t negotiate a loan modification what chance would I have with a Deed in Lieu?
If I can’t talk the 1st lender into any form of modification l