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If the individual you sold residential or commercial property to on an owner financing loan no longer desires the residential or commercial property or can no longer spend 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 actually a secured property loan, and the person who owes you the cash does not pay the loan, you might require to foreclose your lien by offering the residential or commercial property at public auction. The cash received at the auction is applied to the loan.

A foreclosure can be expensive and could result in a suit or bankruptcy.

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

Basically, the borrower just offers the residential or commercial property back. The customer signs a Deed in Lieu of Foreclosure, provides you the keys and leaves.

Note: Bear in mind, that a lot of mortgage business will not accept a Deed in Lieu of Foreclosure. If you owe money to a mortgage company, a Deed in Lieu is rarely an option. Regulations may need 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 any longer.

On the other hand, if you owe money to a friend, household member, or a personal loan provider, you may be able to transfer the residential or commercial property back to the lending institution and cancel the debt utilizing a Deed in Lieu of Foreclosure.

But all parties, Lender and Borrower should agree. The lender should concur to accept the residential or commercial property AND the debtor must consent to move the residential or commercial property, return the secrets, and vacate the residential or commercial property.

Without this shared agreement, there can be no legitimate Deed in Lieu of Foreclosure. A Customer can not just mail the mortgage company a Deed in Lieu of Foreclosure and anticipate the loan to be canceled.

A Borrower might buy a Deed in Lieu of Foreclosure, sign it and mail it, but the mortgage company deserves to refuse to accept the deed and continue with the foreclosure and expulsion procedure. It is a waste of money for a Borrower to spend for a Deed in Lieu of Foreclosure without very first getting the Lender's written approval.

Good to know: Private lenders might choose a Deed in Lieu of Foreclosure because they get the residential or commercial property back rapidly without risk of being taken legal action against or having the debtor file bankruptcy. In this case, the Borrower must let the Lender prepare and pay for the Deed in Lieu of Foreclosure.

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

Good to know: Sometimes the parties may agree to convert the loan to a rental contract. The Borrower transfers the residential or commercial property back to the Lender and after that rents it from the Lender.

deed in lieu

The term "Deed in Lieu" is simply a much shorter method of stating Deed in Lieu of Foreclosure. Homeowners consent to sign a deed in lieu to avoid foreclosure. When a seller accepts this deed, the homeowner is no longer obliged to pay back the mortgage.

What is Deed in Lieu of Foreclosure

A Deed in Lieu of Foreclosure is a complicated file and needs to be prepared by an attorney. This is an official legal document used to give up genuine 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 explained in the Deed in Lieu of Foreclosure.

By signing the Deed in Lieu of Foreclosure, the Borrower is lawfully 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 completely of the overdue 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 may be second 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 retains the right to foreclosure its lien on the residential or commercial property which should "wipe out" or eliminate any liens filed 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 required after the Lender accepts a Deed in Lieu to remove liens or clear title, the fees for the foreclosure need to be considerably less since the Borrower has actually concurred not to contest or otherwise challenge the foreclosure. Also, the Borrower must not be able to apply for 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 approximately $1500 or more. If the Borrower submits a lawsuit to stop the foreclosure, or declare Federal Bankruptcy Protection, the legal charges along might increase, 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 normally about $38.

Deed in lieu of foreclosure prepared for $350

Do you have concerns about a Deed in Lieu of Foreclosure? Email lawyer 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. Peer ranked 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 documents for any realty transaction in Texas.