If you are having trouble making your regular monthly mortgage payments, there are options readily available to you that might benefit you economically, and oftentimes, leave you in a great spot to acquire a home in the future.

The majority of these options are familiar to homeowners: refinancing, loan adjustment, or selling/renting your home. However, an option that many may not understand is a deed in lieu of foreclosure.
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In this article we talk about the essentials of a deed in lieu of foreclosure, and compare it to a comparable alternative, short sale. We also talk about some of the benefits of a deed in lieu of foreclosure, as well as a few of the disadvantages.

No matter which alternative you choose, if you are having difficulty making your mortgage payments and are dealing with the possibility of foreclosure, it remains in your benefit to speak to a foreclosure defense attorney to help examine your possibilities.

Overview of a Deed in Lieu of Forclosure

At its many standard level, a deed in lieu of foreclosure is when a property owner offers the deed to their residential or commercial property back to their mortgage lending institution in exchange for being alleviated of their mortgage financial obligation.

The lending institution then takes title to the residential or commercial property, and acceptance of the deed may terminate the liability of the property owner and anyone else that is liable for the mortgage debt.

Many debtors and homeowners often confuse a deed in lieu of foreclosure with a short sale. A short sale occurs when the homeowner offers their home to a 3rd party for less than the total financial obligation staying on the mortgage loan.

The bank then consents to accept the proceeds from the sale in exchange for releasing the lien on the residential or commercial property. Although comparable, a deed in lieu of foreclosure can be a simpler process.

Rather than going through the selling procedure involved with a short sale, a deed in lieu of foreclosure permits house owners to just hand over the deed in exchange for a release of liability.

Advantages of a Deed in Lieu of Forclosure

A deed in lieu of foreclosure can be beneficial to both the loan provider and the borrower. As kept in mind above, this process allows the house owner to avoid the long and exhausting procedure of offering the home.

Additionally, it permits both parties to avert even longer and pricey foreclosure proceedings.

There are likewise public advantages to the homeowner. Since both the lender and the borrower reach a mutual arrangement through this process, consisting of particular terms regarding when and how the property owner will leave the residential or commercial property, the possibility of having authorities show up with expulsion notifications, or public sales ads being published in papers (as holds true with foreclosure) is evaded.

Occasionally, the celebrations can reach an arrangement that allows the homeowner to rent the residential or commercial property back from the loan for a specific time period.

Because the lending institution saves cash by avoiding the costs generally incurred through the foreclosure procedure, they might be willing to work more with the homeowner to reach settlement terms that agree with to those that want to maintain their living conditions.

Drawbacks to a Deed in Lieu of Foreclosure

Although the loan provider and the customer might reach beneficial settlement terms in the process, this isn't constantly the case. Many problems arise in the settlement procedure when there are secondary liens or judgements against the residential or commercial property.

In this scenario, the loan provider would need to go through the foreclosure process in order to get a clear title. If there are liens or judgements versus your home, the lending institution may either select not to accept a deed in lieu of foreclosure, or include additional terms to the agreement which remain in the very best interest of the house owner.

Another major drawback to a deed in lieu of foreclosure is that the homeowner needs to do the bulk of the work. When a property owner makes an application for a deed in lieu of foreclosure from their loan provider (or servicer), they require to submit all the documents needed by the lending institution, work out all the terms and verify that the last agreement waives any shortage liability.

Deficiency liability is the difference between what the house owner owed the loan provider and the worth of the residential or commercial property when it was given back to the bank.

On the other hand, when a homeowner works on a brief sale, their Real estate agent works out the general terms with the Buyer and often times their attorney works on negotiating with the lending institution or lending institutions to get all of the liens launched and deficiency liability waived in composing.

Many Realtors and Attorneys will take all (or part) of the payment for their services out of the earnings of the sale.

If you wish to employ a lawyer to negotiate your deed in lieu of foreclosure, there is no closing or earnings to assist pay them so you will normally need to spend for their services out of your pocket.

Due to this cost, may property owners that pursue a deed in lieu of foreclosure negotiate with their lender themselves and just work with an attorney to evaluate the last paperwork before they sign it.

From the house owner's point of view, the main downside though this procedure of the loss of the residential or commercial property, loss of income from the residential or commercial property, and the financial investment in the residential or commercial property. In addition to losing the cash bought the home, there are also tax effects that homeowners need to know.

Generally, a conveyance of residential or commercial property is taxable by the federal government. If the loan provider forgives some or all of the shortage and issues an internal revenue service Form 1099-C, borrowers might have to consist of the forgiven financial obligation as taxable income.

This is why it is always essential to get earnings tax guidance before you pursue a deed in lieu of foreclosure or a brief sale.

A deed in lieu of foreclosure can be a beneficial option for some house owners. When facing foreclosure, it is necessary to understand all of your choices and make certain that you are investing your valuable time and energy in the right direction.

An excellent way to do this is to seek advice from with a foreclosure defense lawyer or a property attorney knowledgeable about all of your options to assist you develop a success strategy to navigate the stressful foreclosure process.

Facing Foreclosure? Contact Adam Diamond Law

The legal group at Adam Diamond Law provides convincing legal arguments based upon the current statutes and updated case law designed to protect you in foreclosure and keep you in your house. Contact us today to get started.

DISCLAIMER: This article and any info contained herein is exclusively for informative functions and is just applicable in the state of Illinois. While it is essential that you educate yourself, nothing herein should be interpreted as legal guidance or produce an attorney-client relationship. For particular questions, I always advise you to call a regional attorney for guidance relating to your particular legal requirements.