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If the individual you sold residential or commercial property to on an owner finance loan no longer desires the residential or commercial property or can no longer pay for the residential or commercial property, a Deed in Lieu of Foreclosure may be a good alternative to take the residential or commercial property back and cancel the loan.

If you have actually a protected realty loan, and the individual who owes you the cash does not pay the loan, you might require to foreclose your lien by selling 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 lead to a lawsuit or bankruptcy.

Good to know: An option to a public auction foreclosure is a Deed in Lieu of Foreclosure. The customer simply moves the residential or commercial property back to the lender and the lender cancels the debt. This is in some cases referred to as a "friendly foreclosure" or a "voluntary foreclosure." It can avoid lawsuits and personal bankruptcy.

Basically, the debtor just provides the residential or commercial property back. The borrower signs a Deed in Lieu of Foreclosure, provides you the keys and moves out.

Note: Remember, that a lot of mortgage companies will not accept a Deed in Lieu of Foreclosure. If you owe cash to a mortgage company, a Deed in Lieu is hardly ever a choice. Regulations may require a mortgage company to foreclosure although the Borrower no longer wants the residential or commercial property and does not reside in the residential or commercial property anymore.

On the other hand, if you owe money to a buddy, member of the family, or a personal lender, you might 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 parties, Lender and Borrower need to concur. The lending institution needs to consent to accept the residential or commercial property AND the borrower should agree to transfer the residential or commercial property, return the keys, and abandon the residential or commercial property.

Without this shared agreement, there can be no legitimate Deed in Lieu of Foreclosure. A Debtor can not simply mail the mortgage business a Deed in Lieu of Foreclosure and expect the loan to be canceled.

A Customer may purchase a Deed in Lieu of Foreclosure, sign it and mail it, however the mortgage business can refuse to accept the deed and continue with the foreclosure and expulsion process. 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 composed approval.

Good to understand: Private loan providers might prefer a Deed in Lieu of Foreclosure since they get the residential or commercial property back rapidly without threat of being sued or having the customer file bankruptcy. In this case, the Borrower must let the Lender prepare and spend for the Deed in Lieu of Foreclosure.

Borrowers generally prefer to utilize a Deed in Lieu. It might keep the loan default off of their credit reports and it may prevent an eviction. The Borrower and Lender can just settle on an orderly relocation out of the residential or commercial property.

Good to know: Sometimes the celebrations may consent to transform the loan to a rental arrangement. The Borrower transfers the residential or commercial property back to the Lender and after that leases it from the Lender.

deed in lieu

The term "Deed in Lieu" is simply a shorter way 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 property owner is no longer obligated to pay back the mortgage.

What is Deed in Lieu of Foreclosure

A Deed in Lieu of Foreclosure is a complex file and needs to be prepared by an attorney. This is a formal legal document utilized to give up property 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 moving title to the residential or commercial property back to the Lender in exchange for the cancelation of the unpaid 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 retains 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 might be second liens, home enhancement liens, judgment liens, kid assistance liens and tax liens.

If other liens are discovered 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 remove any liens filed after the Lender's lien

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 costs for the foreclosure need to be significantly less because the Borrower has agreed not to contest or otherwise challenge the foreclosure. Also, the Borrower must not be able to file for Federal Bankruptcy Protection to stop the sale of the residential or commercial property.

An objected to 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 apply for Federal Bankruptcy Protection, the legal costs along could increase, plus the Borrower will remain in the or commercial property without paying for the residential or commercial property.

A Deed in Lieu of Foreclosure costs $350. County recording charges are generally 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 straight 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 ranked for Highest Level of Professional Excellence.
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