When trying to avoid foreclosure the options can become overwhelming. Between mortgage modifications, short sales and deed in lieu of foreclosure, it can be difficult to know which to choose. In general, a deed in lieu is a fast and relatively easy way out from under a mortgage debt. However, there are certain aspects to consider before signing over your title to the lender.
To qualify for a deed in lieu the lender looks for certain aspects of a borrower’s financial situation. Before the lender takes over control and ownership of the property they want to ensure that the property and the borrower meet certain conditions.
- The home owner must be delinquent on their mortgage payments.
- The home owner must be able to demonstrate financial hardship and inability to maintain payments.
- The deed in lieu arrangement must be entered voluntarily.
- The property must be of reasonable or adequate value and in good condition.
Considerations For A Deed In Lieu
If the lender determines the borrower’s financial status and the condition of the property meet qualification requirements, they may approve a deed in lieu. It is important to remember that the lender holds all of the power in this transaction and they maintain the right to approve or deny the agreement. Although the borrower may be able to be absolved of their liability over the debt, they may be held responsible for the deficiency balance or the amount difference between what is owed on the property and what the property is worth. If the lender forgives the deficiency balance the borrower will not be required to pay the amount, but will be responsible for claiming and paying taxes on the amount forgiven by the lender.