What Is a Deed in Lieu?

What Is a Deed in Lieu

Trying to prevent foreclosure? One of your options is a “deed in lieu.” A deed in lieu is a legal process in which a homeowner decides voluntarily to transfer the title of their property to the lender in order to avoid foreclosure. The lender then has the right to sell the property and recoup the amount borrowed. Here are several reasons why a lender might accept or reject a deed in lieu.

The Reasons a Lender May Reject a Deed in Lieu

You should remember that there is no obligation for your lender to accept a deed in lieu. There are certain reasons why they may reject it, including the following:

  • There is a tax lien on your property. In most cases, lenders reject a deed in lieu if there are tax liens attached to the property. If there is a tax lien, the lender would also be taking on that debt. Therefore, unless the property costs more than the total of its encumbrances, a deed in lieu application will most likely be denied. 
  • The home value has depreciated. If the value of your home has decreased, your loan might be higher than the sale price of your home. In this case, a lender may only agree to accept a deed in lieu if you pay the difference between the appraised value of the property and what you owe. 
  • Your home is in poor condition. If your property is not in good condition, the lender will most likely reject the deed in lieu application because they do not want to acquire a project. 

The Reasons Why a Lender May Accept a Deed in Lieu

Even though a lender is not obligated to accept a deed in lieu, they may still agree to do so, and here is a list of reasons why:

  • To get control of your house. In most cases, accepting a deed in lieu is easier and cheaper for lenders. They do not have to go to court or prove that you as a homeowner have not been paying bills in order to receive approval from the court to evict you from the property. 
  • The property is in good condition. A lender will be more likely to accept a deed in lieu if the property is in good condition. This is because such properties do not stay on the real estate market for too long, and they bring a higher price. The lender may demand you to keep your property in good condition with a deed in lieu as a guarantee that they will be able to sell the property for more money in the future. 

Why May a Deed in Lieu Be a Good Solution?

Most homeowners choose a deed in lieu when they want to avoid a foreclosure. However, it is important to remember that your credit score will still be negatively affected because the FICO scoring system still treats deeds in lieu and foreclosures in the same way. The difference is that foreclosure stays on the credit report for seven years, while a deed in lieu lingers for only four years. As a result, if you choose a deed in lieu instead of a foreclosure, you will be able to buy a new home sooner.

Sell Your Property to a Cash Buyer to Avoid Foreclosure

There are several ways to avoid foreclosure, and a deed in lieu is one of them. However, there is another effective method: selling your home to a cash buyer. The main advantage of this method is that a cash buyer is ready to buy your property immediately, as-is. You do not have to make any changes, repairs, or renovations. Moreover, you will get paid in cash. If you own a property in the Tulsa, OK, area that you want to sell fast, We Buy Houses Tulsa is ready to help you. We are a team of professionals whose mission is to make the home-sale process for you as easy and straightforward as possible because we understand how stressful this process can be. All you need to do is to visit our website to request a no-obligation cash offer or give us a call at 918-739-6777.

Leave a Reply