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If the person you sold residential or commercial property to on an owner finance loan no longer wants the residential or commercial property or can no longer spend for the residential or commercial property, a Deed in Lieu of Foreclosure might be a good option to take the residential or commercial property back and cancel the loan.

If you have actually a secured realty loan, and the individual who owes you the cash does not pay the loan, you may require to foreclose your lien by offering the residential or commercial property at public auction. The cash gotten at the auction is applied to the loan.

A foreclosure can be costly and might lead to a lawsuit or insolvency.

Good to know: An alternative to a public auction foreclosure is a Deed in Lieu of Foreclosure. The borrower just transfers the residential or commercial property back to the lending institution and the lending institution cancels the debt. This is often referred to as a "friendly foreclosure" or a "voluntary foreclosure." It can avoid claims and personal bankruptcy.

Basically, the debtor just gives the residential or commercial property back. The borrower signs a Deed in Lieu of Foreclosure, offers you the keys and moves out.

Note: Bear in mind, that most mortgage companies will decline a Deed in Lieu of Foreclosure. If you owe cash to a mortgage company, a Deed in Lieu is seldom an alternative. Regulations may require a mortgage business to foreclosure despite the fact that the Borrower no longer wants the residential or commercial property and does not reside in the residential or commercial property any longer.

On the other hand, if you owe cash to a friend, family member, or a private loan provider, you might have the ability to move the residential or commercial property back to the lending institution and cancel the debt using a Deed in Lieu of Foreclosure.

But all celebrations, Lender and Borrower should agree. The lending institution must agree to accept the residential or commercial property AND the borrower need to consent to transfer the residential or commercial property, return the keys, and abandon the residential or commercial property.

Without this shared agreement, there can be no legitimate Deed in Lieu of Foreclosure. A Debtor can not just mail the mortgage company a Deed in Lieu of Foreclosure and anticipate the loan to be canceled.

A Borrower might a Deed in Lieu of Foreclosure, sign it and mail it, but the mortgage company deserves to refuse to accept the deed and continue with the foreclosure and expulsion procedure. It is a waste of cash for a Borrower to pay for a Deed in Lieu of Foreclosure without very first getting the Lender's written approval.

Good to understand: Private lenders may prefer a Deed in Lieu of Foreclosure due to the fact that they get the residential or commercial property back quickly without threat of being sued or having the customer file personal bankruptcy. In this case, the Borrower needs to let the Lender prepare and spend for the Deed in Lieu of Foreclosure.

Borrowers generally prefer to use a Deed in Lieu. It may keep the loan default off of their credit reports and it may prevent an eviction. The Borrower and Lender can simply agree on an organized move out of the residential or commercial property.

Good to understand: Sometimes the celebrations might consent to convert the loan to a rental arrangement. The Borrower transfers the residential or commercial property back to the Lender and then rents it from the Lender.

deed in lieu

The term "Deed in Lieu" is just a shorter way of saying Deed in Lieu of Foreclosure. Homeowners consent to sign a deed in lieu to avoid foreclosure. When a seller accepts this deed, the house owner is no longer obliged to pay back the mortgage.

What is Deed in Lieu of Foreclosure

A Deed in Lieu of Foreclosure is a complicated file and ought to be prepared by a lawyer. This is an official legal file used to surrender real estate residential or commercial property from the Buyer back to the Lender or Seller.

A copy of the Promissory Note and Deed of Trust which was signed by the Borrower and which is being canceled will both require to be explained in the Deed in Lieu of Foreclosure.

By signing the Deed in Lieu of Foreclosure, the Borrower is lawfully transferring title to the residential or commercial property back to the Lender in exchange for the cancelation of the unsettled balance owed on the Promissory Note secured by the residential or commercial property.

By accepting the Deed in Lieu of Foreclosure, the Lender is lawfully accepting the residential or commercial property as payment in full of the unsettled balance due on the promissory note.

Deed in Lieu of Foreclosure in Texas

Using a Deed in Lieu of Foreclosure in Texas, the Lender keeps the right to conduct a "Friendly Foreclosure" after accepting the Deed in Lieu if other liens are discovered on the title to the residential or commercial property. These other liens may be second liens, home improvement liens, judgment liens, child assistance liens and tax liens.

If other liens are found on the title to the residential or commercial property, the Lender with a Deed in Lieu of Foreclosure retains the right to foreclosure its lien on the residential or commercial property which should "erase" or remove any liens submitted after the Lender's lien

Other liens might consist of the following:

Federal Tax Liens Judgment Liens Mechanic's Lien Home Equity Liens

Even if a foreclosure is required after the Lender accepts a Deed in Lieu to remove liens or clear title, the costs for the foreclosure should be significantly less since the Borrower has concurred not to contest or otherwise challenge the foreclosure. Also, the Borrower ought to not have the ability to apply for Federal Bankruptcy Protection to stop the sale of the residential or commercial property.

A contested foreclosure on a loan not owned by a mortgage business might cost as much as $1500 or more. If the Borrower files a lawsuit to stop the foreclosure, or declare Federal Bankruptcy Protection, the legal charges along might skyrocket, plus the Borrower will remain in the residential or commercial property without spending for the residential or commercial property.

A Deed in Lieu of Foreclosure costs $350. County recording costs are normally about $38.

Deed in lieu of foreclosure prepared for $350

Do you have concerns about a Deed in Lieu of Foreclosure? Email attorney Scott Steinbach directly at scott@texaspropertydeeds.com. Or call 972-960-1850.

R. Scott Steinbach is licensed in the state of Texas. Board Certified by the Texas Board of Legal Specialization in Residential Real Estate Law. AV Preeminent rated by Martindale-Hubble. Peer rated for Highest Level of Professional Excellence.

Texas Residential Or Commercial Property Deeds is a service of The Steinbach Law Office.

The Steinbach Law Office is a Texas Real Estate Law Practice. We prepare all documents for any genuine estate transaction in Texas.