Parsons Realty

Full Service - Low Flat Fee

  • Home
  • Real Estate Search
  • Buyers
  • Blog
  • Contact Us
You are here: Home / Blog / Deed-in-lieu of Foreclosure, How Does It Work?

Deed-in-lieu of Foreclosure, How Does It Work?

September 20, 2008 By

josh_blog_photo.JPGA Deed-in-lieu of Foreclosure is basically giving the house back to the lender.  In most cases this will only work if the borrower does not have a second loan on the property.  The reason is, you can only give the property to one lien holder and the other lender would not agree to release the lien unless they were to receive some sort of compensation.

There are some advantages for both the lender and the borrower and well as some disadvantages.  The benefits to the borrower are you can escape the public notoriety and embarrassment of a foreclosure.  In most cases it will release you of the debt from your loan.  The benefits to the lender are they get the house back quicker and cheaper than if they were to foreclose.

There are several considerations the lender will go through to determine whether or not they will be willing to take the property back.  One is the value of your property. They are going to get an appraisal or a Broker Price Opinion (BPO) to determine the value of the property.  If the lender feels that they can sell the home for what you owe then they will consider taking it back.  However if the lender is feels the value of the property is less than what they can sell it for then they may ask the borrower to sign a promissory note.  Typically there will be no interest on the note and the payments are very low.

Another consideration is how far in default the borrower is.  If they have filed a notice of default and they are within 90 days of the scheduled sale date then they are less likely to take the house back.  The deed-in-lieu process can take 4-6 weeks for them to approve, at this point they will have incurred legal fees to foreclose and they will be close enough to the sale date so they might as well sell it at auction.

The lender is also going to look at how many non performing loans & REO properties (real estate owned) they have on their books.  If the lender is already overloaded with REO properties then they will be less likely to agree to take the property back.  In cases like this the lender will encourage the borrower to sell the property either through a short sale or full payoff.

A deed-in-lieu foreclosure is still going to negatively affect the borrower’s credit, but it will be less damaging than a foreclosure, especially if they were not behind on their payments.  It could also prevent any further collection attempts from the lender.

For other solutions to foreclosure download our Free ebook “Avoid Foreclosure” written by Bill Parsons & Josh Deknoblough.

Filed Under: Blog, Foreclosure Help

530-222-1818
1171 Hilltop Dr
Redding CA 96003

Latest News

  • The Five Most Expensive Homes For Sale In Redding, CA
  • Homes For Sale In Redding, CA Under $300,000
  • Redding Homes For Sale – Inventory Starting to Climb
  • Redding Weekly Real Estate Report: April 8 2013
  • Palo Cedro Home Sales – February 2013

Subscribe

We have new properties coming. Get the latest updates delivered to your inbox in an easy to read email presentation. Imagine finding your next home tomorrow. It happens. Please subscribe below.

We respect and value your privacy. We will only deliver property updates to your email address.

Redding Properties

27,102 Listings
3733 Capricorn Way, Redding, CA 96002

$339,000 3 beds  2 baths  1,294 sqft 3733 Capricorn Way
Redding, CA 96002

IDX
3680 Wasatch Drive, Redding, CA 96001

$439,900 3 beds  2 baths  1,792 sqft 3680 Wasatch Drive
Redding, CA 96001

IDX
previous next

IDX MLS IDX Listing Disclosure © 2025

Information deemed reliable but not guaranteed.

Social Media

  • Facebook
  • Instagram

© Copyright 2025 Parsons Realty · Lic# 01312921 · All Rights Reserved · Powered by steelbridge.io