What Is a Deed in Lieu of Foreclosure?
Foreclosure is equal parts terrifying and confusing. The process is incredibly intimidating, and it doesn’t ever happen when life is easy. There is a lot to know, and if you or someone you know is facing foreclosure, information is your best friend. Until the house is seized, there are still options to explore, and you can see some of those right now. Most homeowners are completely unaware of the concept of a deed in lieu of foreclosure. When it is compared to other common practices for escaping foreclosure, you can see its value and know whether it is worth considering.
The Basics of Foreclosure
Foreclosure is a threat when a homeowner falls behind in their payments. The lender will send a notice, and if things cannot be resolved during the grace period, the lender will eventually be able to auction the house. Up until this happens, you absolutely can negotiate with the lender. It might be possible to get a different monthly payment schedule. You can also potentially sell the house yourself, and any money left after the mortgage is paid is yours to keep. If, however, the house is auctioned, you get nothing except a giant hole in your credit score, and you lose your place to live.
Negotiating With Lenders
If you want to look into negotiating alternative solutions to foreclosure, there are a few things that are common. One is a short sale. In California, you can always sell your house before it is foreclosed on, but it has to cover the mortgage. A short sale is a special case. If you can’t sell the house for as much as you owe, you have to talk to the bank and get them to approve the sale. They agree to take 100% of the proceeds from the sale, and the mortgage is forgiven. Ultimately, it’s up to them to approve this plan.
A loan modification is another common approach. This is where you and the lender agree to new mortgage terms. Typically, the plan is to lower the monthly payments, but it usually extends the duration of the loan. If this type of deal can be struck, it works out for a lot of people.
There is another way to go about negotiating when these options are not viable.
Deed in Lieu of Foreclosure
This is where you simply give the lender the deed and walk away from the whole deal. Again, the lender has to agree to the negotiation, but if they do, this process means that you owe no money and your credit doesn’t take a hit at all. On the downside, it also means that you no longer own the house and have to find a new place to live.
Still, when your back is against the wall, a deed in lieu of foreclosure can be the easiest and most efficient way to get out of a bad mortgage and move on with your life. It’s never the first resort, but it has proven the best last resort for plenty of people.
Sell the Home for Cash
Whenever possible, settling the debt is what is best for homeowners and borrowers. When you cannot catch up through other means, selling the house is often the best bet, but it isn’t always easy to sell within the timeline set by the foreclosure process.
That’s where cash sales come into play. You can contact Frank Buys Houses to get a guaranteed cash offer on your home. We buy houses in any condition and can close within a matter of days. The process is streamlined, so you can beat deadlines and get out of a tough scenario with as little pain as possible.