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If the person you sold residential or commercial property to on an owner finance loan no longer wants the residential or commercial property or can no longer pay for the residential or commercial property, a Deed in Lieu of Foreclosure may be a good choice to take the residential or commercial property back and cancel the loan.

If you have actually a protected realty loan, and the individual who owes you the cash does not pay the loan, you may require to foreclose your lien by offering the residential or commercial property at public auction. The cash gotten at the auction is applied to the loan.

A foreclosure can be costly and could result in a lawsuit or personal bankruptcy.

Good to know: An option to a public auction foreclosure is a Deed in Lieu of Foreclosure. The borrower just moves the residential or commercial property back to the loan provider and the loan provider cancels the financial obligation. This is often referred to as a "friendly foreclosure" or a "voluntary foreclosure." It can avoid claims and bankruptcy.

Basically, the customer just gives the residential or commercial property back. The debtor indications a Deed in Lieu of Foreclosure, gives 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 rarely a choice. Regulations may require a mortgage company to foreclosure although the Borrower no longer wants the residential or commercial property and does not reside in the residential or commercial property any longer.

On the other hand, if you owe money to a good friend, family member, or a private lending institution, you might have the ability to move the residential or commercial property back to the lending institution and cancel the debt using a Deed in Lieu of Foreclosure.

But all parties, Lender and Borrower must concur. The lender should consent to accept the residential or commercial property AND the debtor must consent to move the residential or commercial property, return the keys, and leave the residential or commercial property.

Without this mutual contract, there can be no valid Deed in Lieu of Foreclosure. A Customer can not simply send by mail the mortgage business a Deed in Lieu of Foreclosure and expect the loan to be canceled.

A Debtor might purchase a Deed in Lieu of Foreclosure, sign it and mail it, but the mortgage company deserves to refuse to accept the deed and continue with the foreclosure and eviction procedure. It is a waste of cash for a Borrower to pay for a Deed in Lieu of Foreclosure without first getting the Lender's written approval.

Good to know: Private lenders may prefer a Deed in Lieu of Foreclosure due to the fact that they get the residential or commercial property back rapidly without risk of being sued or having the debtor file insolvency. In this case, the Borrower should let the Lender prepare and pay for the Deed in Lieu of Foreclosure.

Borrowers normally choose to use a Deed in Lieu. It might keep the loan default off of their credit reports and it may avoid an eviction. The Borrower and Lender can simply concur on an organized move out of the residential or commercial property.

Good to know: Sometimes the parties may accept transform the loan to a rental contract. 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 simply a much shorter method of stating Deed in Lieu of Foreclosure. Homeowners agree to sign a deed in lieu to prevent foreclosure. When a seller accepts this deed, the homeowner is no longer bound to pay back the mortgage.

What is Deed in Lieu of Foreclosure

A Deed in Lieu of Foreclosure is a complicated document and must be prepared by a legal representative. This is an official legal file utilized to give up realty 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 described 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 secured 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 perform a "Friendly Foreclosure" after accepting the Deed in Lieu if other liens are found on the title to the residential or commercial property. These other liens may be second liens, home improvement liens, judgment liens, kid assistance liens and tax liens.

If other liens are discovered 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 ought to "erase" or get rid of any liens submitted after the Lender's lien

Other liens may 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 get rid of liens or clear title, the fees for the foreclosure need to be substantially less since the Borrower has agreed not to contest or otherwise challenge the foreclosure. Also, the Borrower needs to not have the ability to declare 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 might cost up to $1500 or more. If the Borrower submits a claim to stop the foreclosure, or files for Federal Bankruptcy Protection, the legal costs along could increase, plus the Borrower will stay 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 normally 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 licensed in the state of Texas. Board Certified by the Texas Board of Legal Specialization in Residential Real Estate Law. AV Preeminent rated by Martindale-Hubble. Peer ranked for Highest Level of Professional Excellence.
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