Deed in lieu vs Foreclosure?
June 21, 2012
What is the difference between a deed in lieu and foreclosure?
A deed in lieu of foreclosure (also known as a deed in lieu) still results in you having to leave your home. However, you’ll technically avoid having “foreclosure” on your credit report and you’ll avoid being evicted from your home.
What is a deed in lieu of foreclosure?
With a deed in lieu (vs foreclosure), you voluntarily transfer ownership of the property to your mortgage company or investor to satisfy the balance due on your first mortgage. With a foreclosure, the surrender of the property is determined by the mortgage company. A deed in lieu generally takes about 90 days to complete.
Will I need to do anything else to settle my debt with the bank?
Whether or not you will need to pay a deficiency on your balance is based on factors such as the state you live in and the bank’s guidelines. A deed in lieu does not automatically waive the bank’s right to pursue you for a deficiency judgement in Nevada. It must specifically state so in the contract.
Why should I consider a deed in lieu?
We recommend you avoid it at all costs. However, there are those rare instances where it may be necessary and it does provide, in some cases, a “Cash for Keys” incentive that could help you with moving costs. Plus you’ll have more control over the time in which you leave your house.
How will a deed in lieu affect my credit?
During the roughly 90 day process, the lender continues to report your late payments as a delinquency to the credit bureaus. Your lender provides the instructions on how the deed in lieu will be reported however almost all credit experts will tell you deed in lieu are reported with the same code as a foreclosure. See more info on this here: http://michaelsrealestate.com/wp-content/uploads/2012/06/Deed-in-Lieu-of-Foreclosure-and-Credit-Score.pdf
A deed in lieu generally takes less time to complete than a foreclosure so the reported delinquency could be shorter that it would with a foreclosure. The process is over faster and so is your the recovery period on your credit. HOWEVER, the consequences of a deed in lieu vs foreclosure are nearly identical so we recommend this option be avoided at all costs.
How do I know if I am eligible for a deed in lieu?
To see if you are eligible for a deed in lieu, call a Las Vegas Short Sale Specialist at 702-675-8211 or request a callback and we will help you navigate through the guidelines.