I am behind on my payments and my bank recently started the foreclosure process. I received something in the mail about a "deed in lieu of foreclosure." What is that and how does it affect my credit? -Jon

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.

Leave a Reply.

    East Lion Realty & Mortgage

    We're a big-town company that handles realty in all of Southern California. Haven't heard of us? Come to our website to learn more then!

    About the Team

    Here at East Lion Realty & Mortgage, we take care of you and want to learn more about you. In order to do that, you need to learn more about us as individuals. Go here to view our profiles.

    Thinking about a Short Sale?

    Ashish can help you short sale your property and get back on your feet. Send him an e-mail at Ashish@EastLionInc.com. He will contact you for a free consultation and explain how the process works in detail and answer any questions you may have. Or, if you prefer, you can call him directly at (818) 259-3455.

    Discover how other sellers successfully completed a short sale and request a free consultation by going to our Facebook page.


    Curb Appeal
    Finding Agents
    Hardship Letter
    Home Value
    Load Modification
    Short Sale
    Tiny Homes