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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 pay for the residential or commercial property, a Deed in Lieu of Foreclosure may be a great alternative to take the residential or commercial property back and cancel the loan.

If you have a secured realty loan, and the individual who owes you the money 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 pricey and might lead to a claim or bankruptcy.

Good to know: An alternative to a public auction foreclosure is a Deed in Lieu of Foreclosure. The debtor just transfers the residential or commercial property back to the loan provider and the lending institution cancels the debt. This is sometimes described as a "friendly foreclosure" or a "voluntary foreclosure." It can avoid suits and insolvency.

Basically, the debtor simply offers the residential or commercial property back. The debtor indications a Deed in Lieu of Foreclosure, gives you the secrets and leaves.

Note: Keep in mind, that most mortgage business will decline a Deed in Lieu of Foreclosure. If you owe cash to a mortgage business, a Deed in Lieu is hardly ever an option. Regulations may need a mortgage company to foreclosure even though the Borrower no longer desires the residential or commercial property and does not live in the residential or commercial property anymore.

On the other hand, if you owe cash to a buddy, relative, or a private lender, you may be able to move the residential or commercial property back to the lending institution and cancel the financial obligation utilizing a Deed in Lieu of Foreclosure.

But all celebrations, Lender and Borrower must concur. The lending institution must consent to accept the residential or commercial property AND the debtor need to accept move the residential or commercial property, return the keys, and leave the residential or commercial property.

Without this mutual contract, there can be no legitimate Deed in Lieu of Foreclosure. A Customer can not merely mail the mortgage business a Deed in Lieu of Foreclosure and expect the loan to be canceled.

A Customer might purchase a Deed in Lieu of Foreclosure, sign it and mail it, but the mortgage company deserves to contradict the deed and continue with the foreclosure and expulsion process. It is a waste of money for a Debtor to spend for a Deed in Lieu of Foreclosure without very first getting the Lender's composed consent.

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

Borrowers usually choose to utilize a Deed in Lieu. It might keep the loan default off of their credit reports and it might avoid an eviction. The Borrower and Lender can merely concur on an orderly relocation out of the residential or commercial property.

Good to understand: Sometimes the celebrations may accept convert the loan to a rental agreement. 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 much shorter method of saying Deed in Lieu of Foreclosure. Homeowners agree to sign a deed in lieu to prevent foreclosure. When a seller accepts this deed, the property owner is no longer obligated to pay back the mortgage.

What is Deed in Lieu of Foreclosure

A Deed in Lieu of Foreclosure is an intricate file and needs to be prepared by an attorney. This is a formal legal document 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 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 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 legally accepting the residential or commercial property as payment completely of the unpaid 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 carry out 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 might be 2nd liens, home improvement liens, judgment liens, child 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 maintains the right to foreclosure its lien on the residential or commercial property which should "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 eliminate liens or clear title, the costs for the foreclosure must be substantially less since the Borrower has actually agreed not to contest or otherwise challenge the foreclosure. Also, the Borrower ought to 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 up to $1500 or more. If the Borrower files a suit to stop the foreclosure, or files for Federal Bankruptcy Protection, the legal costs along could skyrocket, plus the Borrower will remain in the residential or commercial property without paying for the residential or commercial property.

A Deed in Lieu of Foreclosure costs $350. County recording costs are typically 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 certified 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. for Highest Level of Professional Excellence.

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

The Steinbach Law Firm is a Texas Real Estate Law Practice. We prepare all files for any real estate transaction in Texas.