The economic downturn has presented people with all kinds of financial difficulty, including the inability to pay their mortgages. A deed in lieu of foreclosure is an option for that releases individuals from their obligation to pay overdue and upcoming payments for their homes. If you are facing foreclosure and you are considering this option, below you find information that may give you a better understanding.
If you are forced into foreclosure, your home will be taken from you. A deed in lieu of foreclosure is a process that can allow you to avoid that situation, but you will still lose your home. The difference is that you will actually be giving it away in return for relief of the responsibility to pay what you owe.
To go about doing this, you will likely have to contact your mortgage holder and express interest in this option. Sometimes lenders are hesitant initially and they may require you to put your home on the market first and attempt to sell it.
If your offer is accepted, you will be presented with an agreement in lieu of foreclosure. This document should outline the terms of the deal that you are about to make. You should be sure that it relieves you of all responsibility, including missed payments and deficiencies. If you read the terms and agree, you will be signing a legally binding contract.
You are probably aware that a deed is the document that entitles you to possession of your home. You will be required to transfer the deed to lender as part of the deal, which means that lender will own your home. In return, your debt should be dissolved if your agreement is drafted correctly. Usually, after getting the deed, the new owner (your former mortgage holder) will try to sell the property to recover their losses.
There are numerous areas where extreme caution must be exercised when opting for a deed in lieu of foreclosure. If you are not careful, you may find that the deal is neither as clean nor advantageous as you expected. This is especially true if you are not sure to protect yourself against the collection of any deficiency, which is an amount the results when the property is sold for less than you owed. To avoid unexpected problems, it is best to have a real estate attorney advise you throughout the proceedings.