Deed in Lieu of Foreclosure

A Deed in Lieu (DIL) is an option for homeowners who wish to avoid foreclosure. A DIL is where the lender and borrower agree to cancel the loan in exchange for the property. The borrower voluntarily hands over the property to the lender. The lender then agrees to cancel all foreclosure proceedings on the property. The goal is for all parties involved to avoid foreclosure.

A Deed In Lieu of foreclosure means:

• The homeowner can avoid the hassle of selling their property.
• The effects of a DIL on a homeowner's credit report will likely be the same as it would be with a foreclosure.

Banks are not likely to forgive a deficiency balance. However, if the bank does agree to forgive a deficiency balance, sellers should be aware that a DIL may affect them at tax time. The forgiven debt may be considered taxable income by the government.

It may be difficult to negotiate a DIL with your lender. Banks typically favor the cash made in a sale rather than real estate. However, banks may wish to avoid the expensive cost of foreclosures and accept a DIL. Because a DIL occurs outside the court system, it is important to consult an experienced real estate agent to negotiate on your behalf. That way sellers can avoid a "foreclosure" black mark on their credit report.

Please contact Kara Homes & Associates if you would like someone to represent your Deed in Lieu of Foreclosure proceedings.