Deed In Lieu
What is a Deed in Lieu?
Deed in lieu of foreclosure is a process where the homeowner gives the property back to the lender because they cannot afford to make mortgage payments. The lender agrees to sell the property to receive a part or the entire amount of the homeowner's loan balance.
How does Deed in Lieu work?
When a homeowner chooses a deed in lieu option to avoid foreclosure, the homeowner must sign several legal documents such as the Warranty deed, Agreement in Lieu of Foreclosure, or a quit claim deed. The Agreement in Lieu of Foreclosure document reveals the terms and conditions of the deed-in-lieu, and is signed by the borrower and the lender. The Warranty deed gives legal ownership of the property to the lender.
The lender agrees to sign off on the borrower's note as "paid" and provides the Agreement in Lieu of Foreclosure and the Warranty deed, which agrees to cancel the debt and to waive the right of deficiency judgment. The lender agrees that the homeowner will not be pursued if the unpaid debt is not fully recovered by the sale of the property.
An escrow company is involved in the deed in lieu process. At the end of the transaction, the lender gives the escrow company the borrower's note and marks it as "paid". The deed is recorded by the escrow company to transfer legal ownership of the property and sends the note to the borrower. After this step, the homeowner (borrower) is released from the liability of the loan payments.
Are there any tax consequences to consider with Deed in Lieu?
There may be income tax consequences to consider with the Deed in Lieu of Foreclosure. The IRS often gets involved with Deed in Lieus, because the deficiency that results from the sale of the property is typically forgiven by the lender. The deficiency forgiveness by the lender may be seen as a relief of debt and can be treated as income by the IRS. Please consult with a qualified professional accountant or tax advisor for specific details.
Loan Modification vs. Deed in Lieu?
Mortgage loan modification is an option for the homeowner that wants to keep their home. It allows the homeowner to negotiate a lower rate on their mortgage and also sometimes get a principal reduction on the home loan. If the homeowner does not want to keep the home and just walk away, a deed in lieu can be the better option than loan modification.
At LaBovick Law Group, our West Palm Beach foreclosure lawyers are experienced and devoted to assisting you in finding a workout solution. Contact our office today to find out your legal options. We offer a Free Consultation. You can fill out the form to the left for an assessment of your personal matter.
If you prefer to speak to us by phone, please feel free to call 888.777.3884 to discuss your personal matter with one of our professionals.
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The Loss Mitigation Team at LaBovick Law Group assists clients throughout Florida, including Palm Beach, Martin, St. Lucie, and Broward counties, and the cities of Palm Beach Gardens, Jupiter, West Palm Beach, Boynton Beach, Stuart, Port St. Lucie, Delray Beach, Lake Worth, Boca Raton, Deerfield Beach, Fort Lauderdale and many other areas