Hey, Jon. Some people say it is a great way to avoid foreclosure. Actually, all it does is accelerate the foreclosure process. A deed in lieu is not better for your credit than a foreclosure. I've heard many people say, "A Deed In Lieu is better for your credit because you avoid foreclosure." It's kind of sad to hear them say it. After you sign all the Deed In Lieu paperwork, then your house will still be sold at a foreclosure auction. Any person can actually bid on the house at the auction. It will show up on your credit history as a foreclosure.
A Deed In Lieu does not always mean that you will not owe the lender any more money. A deed in lieu is similar to a no contest plea. The judge stops analyzing the foreclosure case and simply schedules the foreclosure auction. Unless otherwise stipulated, the lender still has all the deficiency and future collection rights. They may come after you for the loss.
A deed in lieu is not always easy. This is absolutely not true. The process required a lot of follow up with the lender. Most lenders require you submit all your financial information. They want to make sure that you genuinely cannot afford the property. The process often takes between 20 and 40 hours over the course of several months. First, you submit your paperwork. Then, you call your lender to make sure they received your paperwork. Then, you have to wait while they review it. Then, you have to answer any questions and provide any paperwork they request. This is insane to me. Why not just live for free until your lender forecloses? A Deed In Lieu of foreclosure offers almost zero benefit to you. So why go through the aggravation? That is why I always recommend a short sale over a Deed In Lieu. At least you can have a Realtor help you with the process.