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If the individual 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 an excellent alternative to take the residential or commercial property back and cancel the loan.

If you have actually a protected real estate loan, and the person who owes you the cash does not pay the loan, you might need to foreclose your lien by offering the residential or commercial property at public auction. The money received at the auction is applied to the loan.

A foreclosure can be pricey and could lead to a suit or bankruptcy.

Good to understand: An option to a public auction foreclosure is a Deed in Lieu of Foreclosure. The borrower just transfers the residential or commercial property back to the loan provider and the lender cancels the financial obligation. This is in some cases described as a "friendly foreclosure" or a "voluntary foreclosure." It can prevent claims and insolvency.

Basically, the borrower merely gives the residential or commercial property back. The customer indications a Deed in Lieu of Foreclosure, gives you the keys and moves out.

Note: Bear in mind, that a lot of mortgage companies will decline a Deed in Lieu of Foreclosure. If you owe cash to a mortgage business, a Deed in Lieu is seldom an option. Regulations might require a mortgage business to foreclosure although the Borrower no longer wants the residential or commercial property and does not live 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 lender, you may have the ability to transfer the residential or commercial property back to the loan provider and cancel the debt using a Deed in Lieu of Foreclosure.

But all celebrations, Lender and Borrower must concur. The loan provider must agree to accept the residential or commercial property AND the customer must consent to transfer the residential or commercial property, return the secrets, and abandon the residential or commercial property.

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

A Borrower might buy a Deed in Lieu of Foreclosure, sign it and mail it, however the mortgage company can refuse to accept the deed and continue with the foreclosure and eviction process. It is a waste of cash for a Borrower to pay for a Deed in Lieu of Foreclosure without first getting the Lender's composed consent.

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 rapidly without risk of being taken legal action against or having the customer file personal bankruptcy. In this case, the Borrower ought to let the Lender prepare and pay for the Deed in Lieu of Foreclosure.

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

Good to know: Sometimes the celebrations may agree to transform 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 prevent foreclosure. When a seller accepts this deed, the property owner is no longer obliged to repay the mortgage.

What is Deed in Lieu of Foreclosure

A Deed in Lieu of Foreclosure is an intricate document and must be prepared by an attorney. This is an official legal file used 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 need to be described in the Deed in Lieu of Foreclosure.

By signing the Deed in Lieu of Foreclosure, the Borrower is legally 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 legally accepting the residential or commercial property as payment in full 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 perform 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, kid 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 maintains the right to foreclosure its lien on the residential or commercial property which ought to "clean out" or get rid of any liens filed after the Lender's lien
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Other liens might consist of 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 remove liens or clear title, the charges for the foreclosure should be substantially less since the Borrower has actually 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 might cost as much as $1500 or more. If the Borrower files a suit to stop the foreclosure, or declare Federal Bankruptcy Protection, the legal fees along could 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 costs are usually about $38.

Deed in lieu of foreclosure prepared for $350

Do you have questions about a Deed in Lieu of Foreclosure? Email attorney 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 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 Practice is a Texas Real Estate Law Firm. We prepare all documents for any property transaction in Texas.