Deed in Lieu of Foreclosure

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If the individual you sold residential or commercial property to on an owner finance loan no longer desires the residential or commercial property or can no longer pay for the residential or commercial property, a Deed in Lieu of Foreclosure might be an excellent option to take the residential or commercial property back and cancel the loan.

If you have a secured realty loan, and the person who owes you the cash does not pay the loan, you might require to foreclose your lien by selling the residential or commercial property at public auction. The cash gotten at the auction is applied to the loan.

A foreclosure can be pricey and could result in a lawsuit or insolvency.

Good to know: A choice to a public auction foreclosure is a Deed in Lieu of Foreclosure. The customer simply transfers the residential or commercial property back to the loan provider and the lender cancels the financial obligation. This is in some cases referred to as a "friendly foreclosure" or a "voluntary foreclosure." It can avoid suits and bankruptcy.

Basically, the debtor just provides the residential or commercial property back. The customer signs a Deed in Lieu of Foreclosure, provides you the secrets and leaves.

Note: Remember, that many mortgage companies will not accept a Deed in Lieu of Foreclosure. If you owe money to a mortgage business, a Deed in Lieu is hardly ever an option. Regulations may require a mortgage company to foreclosure even though the Borrower no longer desires the residential or commercial property and does not live in the residential or commercial property anymore.

On the other hand, if you owe money to a good friend, household member, or a private lending institution, you might be able to transfer the residential or commercial property back to the loan provider and cancel the debt using a Deed in Lieu of Foreclosure.

But all parties, Lender and Borrower should agree. The lending institution needs to concur to accept the residential or commercial property AND the debtor should agree to transfer the residential or commercial property, return the secrets, and vacate the residential or commercial property.

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

A Customer might buy a Deed in Lieu of Foreclosure, sign it and mail it, however the mortgage business has the right to contradict the deed and continue with the foreclosure and eviction procedure. It is a waste of money for a Debtor to pay for a Deed in Lieu of Foreclosure without very first getting the Lender's composed permission.

Good to know: Private loan providers might choose a Deed in Lieu of Foreclosure because they get the residential or commercial property back rapidly without danger of being sued or having the debtor file bankruptcy. In this case, the Borrower ought to let the Lender prepare and pay for the Deed in Lieu of Foreclosure.

Borrowers usually prefer to use a Deed in Lieu. It might keep the loan default off of their credit reports and it might prevent an expulsion. The Borrower and Lender can simply agree on an organized relocation out of the residential or commercial property.

Good to know: Sometimes the celebrations may consent to transform the loan to a rental arrangement. The Borrower transfers the residential or commercial property back to the Lender and after that leases it from the Lender.

deed in lieu

The term "Deed in Lieu" is just a shorter way 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 obligated to repay the mortgage.

What is Deed in Lieu of Foreclosure

A Deed in Lieu of Foreclosure is a complicated file and should be prepared by an attorney. This is a formal legal document used to surrender genuine 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 explained in the Deed in Lieu of Foreclosure.

By signing the Deed in Lieu of Foreclosure, the Borrower is legally transferring 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 completely of the unpaid 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 second liens, home enhancement liens, judgment liens, child assistance liens and tax liens.

If other liens are found 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 get rid of any liens submitted after the Lender's lien

Other liens might include 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 eliminate liens or clear title, the fees for the foreclosure ought to be substantially less due to the fact that the Borrower has agreed not to contest or otherwise challenge the foreclosure. Also, the Borrower should not have the ability 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 as much as $1500 or more. If the Borrower submits a claim to stop the foreclosure, or files for Federal Bankruptcy Protection, the legal costs along might escalate, plus the Borrower will remain in the residential or commercial property without paying for the residential or commercial property.

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

Deed in lieu of foreclosure prepared for $350

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

R. Scott Steinbach is certified 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.