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If the person you offered 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 great alternative to take the residential or commercial property back and cancel the loan.

If you have actually a protected real estate loan, and the individual who owes you the cash does not pay the loan, you may need to foreclose your lien by selling the residential or commercial property at public auction. The cash received at the auction is used to the loan.

A foreclosure can be expensive and might lead to a suit or bankruptcy.

Good to know: An alternative to a public auction foreclosure is a Deed in Lieu of Foreclosure. The debtor merely moves the residential or commercial property back to the loan provider and the lender cancels the debt. This is sometimes referred to as a "friendly foreclosure" or a "voluntary foreclosure." It can prevent lawsuits and bankruptcy.

Basically, the debtor merely offers the residential or commercial property back. The debtor signs a Deed in Lieu of Foreclosure, offers you the keys and leaves.

Note: Keep in mind, that a lot of mortgage business will decline a Deed in Lieu of Foreclosure. If you owe money to a mortgage business, a Deed in Lieu is hardly ever an alternative. Regulations might require a mortgage business to foreclosure although the Borrower no longer desires the residential or commercial property and does not reside in the residential or commercial property anymore.

On the other hand, if you owe money to a buddy, member of the family, or a private lending institution, you may be able to transfer 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 must concur. The lending institution must concur to accept the residential or commercial property AND the debtor should concur to transfer the residential or commercial property, return the secrets, and vacate the residential or commercial property.

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

A Debtor might acquire a Deed in Lieu of Foreclosure, sign it and mail it, but the mortgage business has the right to refuse to accept the deed and continue with the foreclosure and expulsion process. It is a waste of money for a Borrower to pay for a Deed in Lieu of Foreclosure without first getting the Lender's written permission.

Good to understand: Private lending institutions may prefer a Deed in Lieu of Foreclosure because they get the residential or commercial property back rapidly without danger of being taken legal action against or having the customer file bankruptcy. In this case, the Borrower should let the Lender prepare and spend for the Deed in Lieu of Foreclosure.

Borrowers typically prefer to use a Deed in Lieu. It might keep the loan default off of their credit reports and it may prevent an expulsion. The Borrower and Lender can just settle on an organized relocation out of the residential or commercial property.

Good to understand: Sometimes the parties might consent to convert the loan to a rental arrangement. The Borrower transfers the residential or commercial property back to the Lender and then leases 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 homeowner is no longer bound to repay the mortgage.

What is Deed in Lieu of Foreclosure

A Deed in Lieu of Foreclosure is a complex file and must be prepared by an attorney. This is an official legal file utilized to give up realty 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 described in the Deed in Lieu of Foreclosure.

By signing the Deed in Lieu of Foreclosure, the Borrower is legally moving title to the residential or commercial property back to the Lender in exchange for the cancelation of the overdue 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 completely 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 maintains 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, kid assistance liens and tax liens.

If other liens are discovered 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 ought to "eliminate" or get rid of any liens submitted after the Lender's lien

Other liens might include the following:

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

Even if a foreclosure is needed after the Lender accepts a Deed in Lieu to get rid of liens or clear title, the fees for the foreclosure should be significantly less because the Borrower has agreed not to contest or otherwise challenge the foreclosure. Also, the Borrower must not be able to declare 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 may cost approximately $1500 or more. If the Borrower submits a lawsuit to stop the foreclosure, or files for Federal Bankruptcy Protection, the legal fees along might escalate, plus the Borrower will stay in the residential or commercial property without spending for the residential or commercial property.

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

Deed in lieu of foreclosure gotten ready for $350

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

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