A Deed in Lieu is One Way Out. In other words, “Stop the World. I want to get off.”

REALTOR® Outlook

By Kay Wilson-Bolton

August 18, 2008

To some this simply means, I don’t want to play this game anymore. To homeowners who can’t make their payment and to others who don’t want to, deeds in lieu of foreclosure are a way of getting rid of that house that is now so much trouble.

It is an alternative to a short sale or foreclosure . It means that homeowners simply give their property to the lender who made them the loan.

Sounds pretty simple and rather attractive to most.   Remember that nothing is easy. No matter your worldview, we don’t shed the consequences of our decision so easily, and REALTORS® need a basic understanding of this process to effectively assist their clients in these circumstances.

A deed in lieu of foreclosure is a deed given by the trustor (the borrower) to the beneficiary (the lender) to stop the foreclosure process or as a way to completely avoid the start of the foreclosure process.

When a lender accepts a deed in lieu of foreclosure, the lender avoids the costs and delays of foreclosing. However, junior liens are not extinguished whereas in a foreclosure, junior liens are.

The borrower may try to set the conveyance aside, and/or the borrower’s other creditors may argue that the conveyance was a “fraudulent conveyance” which jeopardizes their ability to satisfy their claims against the borrower.

Lenders can protect themselves against hidden junior liens by obtaining an endorsement to the beneficiary’s title insurance policy that places title in the beneficiary free and clear of any junior liens.

A deed in lieu of foreclosure and thus stops the foreclosure and, the borrower avoids any further injury to his/her credit and insulates himself/herself from any possible exposure to a deficiency judgment.

If the deed in lieu is given to the lender early on, the borrower avoids having a notice of default recorded against his or her name.  However, the borrower will be denied any opportunity to retain the excess proceeds, if there are any, following a trustee’s sale.

Borrowers better have a clear written agreement between the borrower and the lender regarding this issue of whether the debt is cancelled or whether the borrower still owes the lender any additional sums of money when tax time rolls around.

A deed in lieu of foreclosure, given at the time of making the loan or required to be given in the loan documents, effectively cuts off the borrower’s redemption rights (with a judicial foreclosure only) following default and is prohibited by law.

At one time, there was a distinction about between the disclosure requirements upon a bank that foreclosed on a property and one who accepted a deed in lieu of foreclosure.

In this day of meth labs, death by suicide and AIDS, these elements are problematic to a buyer of a home acquired by foreclosure or by a deed in lieu of foreclosure.

The bottom line is for all buyers to beware, work with people you know and trust or is known by someone who is.

Ask questions. Demand answers. Don’t pay for things that are actually free. Remember that a prostitute is a person who willingly uses his or her talent or ability in a base and unworthy way, usually for money.

A predator is an organism that lives by preying on other organisms and victimizes, plunders, or destroys, especially for one’s own gain. They eat their prey while it’s still alive.

Kay Wilson-Bolton is the owner of CENTURY 21 Buena Vista with offices in Ventura and Santa Paula. She brings a regional perspective to local issues. She can be reached at 805.340.5025. Her web address is www.readysetkay.com

 

About Kay Wilson-Boltonhttp://www.kaywilsonbolton.netWith a full-time career in real estate, I can add to your bank of knowledge, not only in real estate but in many areas of life that deal with people and relationships and choices. My real estate career has taught me many lessons about planning ahead and looking forward. I believe in helping along the way so that they can be the best they can be in any situation. I serve as a Fire Department Chaplain and Coordinator for the Many Meals Project which serves homeless and hungry families in my community. The event is far more than many meals. As a result of my work with the homeless population in my community, I received the Good Neighbor Award 2017 from the National Association of Realtors and named as a Champion of Homes in 2015 by the California Association of Realtors. I make pastoral visits to the inmates in the County Jail System and offer them what God says about "all things being new" and His remarkable plan for our lives. I have served my community as Mayor and in many volunteer capacities. I serve others by serving God first. My husband is involved in prison ministry and is a graphic artist. We live a simple life in Santa Paula with an office cat named Scout, three rescued poodles and a cat named Tony Diane at home.

Leave a Reply if you like.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s