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If the person you sold residential or commercial property to on an owner financing 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 alternative to take the residential or commercial property back and cancel the loan.

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

A foreclosure can be expensive and could lead to a suit or bankruptcy.

Good to know: A choice to a public auction foreclosure is a Deed in Lieu of Foreclosure. The debtor simply transfers the residential or commercial property back to the loan provider and the loan provider cancels the debt. This is in some cases referred to as a "friendly foreclosure" or a "voluntary foreclosure." It can avoid suits and personal bankruptcy.

Basically, the debtor simply offers the residential or commercial property back. The debtor indications a Deed in Lieu of Foreclosure, gives you the secrets and moves out.

Note: Keep in mind, that many mortgage companies will decline a Deed in Lieu of Foreclosure. If you owe cash to a mortgage company, a Deed in Lieu is seldom a choice. Regulations may require a mortgage business to foreclosure despite the fact that the Borrower no longer desires the residential or commercial property and does not reside in the residential or commercial property anymore.

On the other hand, if you owe money to a good friend, relative, or a private loan provider, you might be able to transfer 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 loan provider should agree to accept the residential or commercial property AND the debtor should consent to move the residential or commercial property, return the keys, and leave the residential or commercial property.

Without this shared agreement, there can be no valid Deed in Lieu of Foreclosure. A Borrower can not merely mail the mortgage company a Deed in Lieu of Foreclosure and expect the loan to be canceled.

A Borrower may purchase a Deed in Lieu of Foreclosure, sign it and mail it, but the mortgage business can contradict the deed and continue with the foreclosure and expulsion process. It is a waste of money for a Customer to pay for a Deed in Lieu of Foreclosure without first getting the Lender's written authorization.

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

Borrowers usually choose to use a Deed in Lieu. It may keep the loan default off of their credit reports and it might prevent an expulsion. The Borrower and Lender can merely settle on an organized move out of the residential or commercial property.

Good to understand: Sometimes the parties might consent to transform the loan to a rental arrangement. 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 shorter way of saying Deed in Lieu of Foreclosure. Homeowners consent to sign a deed in lieu to avoid foreclosure. When a seller accepts this deed, the property owner is no longer bound to repay the mortgage.

What is Deed in Lieu of Foreclosure

A Deed in Lieu of Foreclosure is an intricate document and must be prepared by an attorney. This is a formal legal document utilized to give up genuine estate 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 need 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 owed on the Promissory Note secured by the residential or commercial property.

By accepting the Deed in Lieu of Foreclosure, the Lender is lawfully accepting the residential or commercial property as payment in full of the unsettled balance due on the promissory note.

Deed in Lieu of Foreclosure in Texas
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Using a Deed in Lieu of Foreclosure in Texas, the Lender retains the right to carry out 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 2nd liens, home enhancement liens, judgment liens, kid assistance liens and tax liens.

If other liens are found 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 must "clean out" or eliminate any liens submitted after the Lender's lien

Other liens might include the following:

Federal Tax Liens Judgment Liens Mechanic's Lien Home Equity Liens

Even if a foreclosure is needed after the Lender accepts a Deed in Lieu to get rid of liens or clear title, the costs for the foreclosure should be significantly less due to the fact that the Borrower has agreed not to contest or otherwise challenge the foreclosure. Also, the Borrower needs to not have the ability to file for Federal Bankruptcy Protection to stop the sale of the residential or commercial property.

A contested foreclosure on a loan not owned by a mortgage company might cost approximately $1500 or more. If the Borrower files a suit to stop the foreclosure, or files for Federal Bankruptcy Protection, the legal fees along could escalate, 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 charges are generally 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 directly at scott@texaspropertydeeds.com. Or call 972-960-1850.

R. Scott Steinbach is certified 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.

Texas Residential Or Commercial Property Deeds is a service of The Steinbach Law Practice.

The Steinbach Law Office is a Texas Real Estate Law Practice. We prepare all documents for any property transaction in Texas.
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