Even though homeowners are facing financial hardships, there are many ways to avoid foreclosure. On such way of avoiding foreclosure is using the Deed in lieu of foreclosure. This however may or may not be the best choice for the homeowners. Deed in lieu of foreclosure is usually the last option that would be used by the lenders. In this case, the homeowner will transfer the title of the property to the homeowner and will give back the home in a perfect condition. The lender in return will give the homeowner a fully paid up status on the mortgage loan and won’t bring a deficiency suit against them. This will enable the homeowner to walk away from the house without being foreclosed. The credit damage to the score is much lower in comparison to the foreclosure. Moreover if the Deed in lieu of foreclosure is performed under HAFA, then the homeowner stands to gain $3000 in monetary benefits known as relocation expenses.
However there are certain other conditions that the homeowner should note. These include Agreement in Lieu of Foreclosure and either a Quit Claim Deed; Warranty Deed or a Grant Deed. The agreement laws down all terms and conditions for the Deed in lieu of foreclosure. This must be agreed explicitly and signed by both parties before the property is transferred in the name of the lender.
Once this is through, the lender will give the homeowner 2 documents. The first document will lay down that the borrower has paid the mortgage loan amount in full and the will be waiver document stating that the lender will waive off any deficiency judgment. It’s important for the homeowner to ensure that they get both the documents signed by the lender after they have transferred the property. In the event that the lender doesn’t give these documents, the lender can still sue the homeowner at a later date in the future.
Further after the property has been transferred, it’s important for the homeowner to note that they aren’t liable for the payment of any fees or cots regarding the property and this should also be stated in the Deed in lieu of foreclosure. For those that have very little equity in the house, Deed in lieu of foreclosure is a perfect way of ensuring that they get away without being foreclosed. In case the Deed in lieu of foreclosure takes place under HAFA, the homeowner is even entitled to $3000 as relocation bonus.
In case, the homeowner has quite a bit of equity in the house, then they should look for other alternatives that would include a short sale or a private sale to ensure that they retain the equity in the house. If the homeowner has the means to pay for lower mortgage amounts, then they should go for a loan modification process. This will help them to stay in their own home, build equity and ensure that they are able to stop the foreclosure process. It’s advisable that the homeowner should look at all options before going for Deed in lieu of foreclosure.