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Shannon Chaix, Real Estate Pro in Lakeside, MT

What is your opinion of a "Deed in Lieu" and have you heard of more successes or failures with it?

Asked by Shannon Chaix, Lakeside, MT Sat Feb 2, 2013

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Deed in lieu has a potential problem for the bank or a successor buyer. The deed may extinguish the first lien held by the bank but it does not release any other liens attached to the house. Filing bankruptcy only releases the the obligation of the person from any personal liability. It does not release the liens from the property. A foreclosure will release most prior liens, depending on your jurisdiction. Thus any buyer purchasing the property after a deed in lieu takes subject to the liens.
0 votes Thank Flag Link Thu Feb 7, 2013
Hi Shannon,

Prior to becoming an agent, I worked for a real estate law firm that did Deeds in Lieu all the time. In the hands of a competent legal professional, Deeds in Lieu can be a viable option for some.

Best of Luck,

Barbara Grandolfo
0 votes Thank Flag Link Thu Feb 7, 2013
I do not have much experience with a deed in lieu - most people here are going the short sale route to avoid a full foreclosure. Seek legal advice as there is always the possibility that some of the debt will not be foregiven, even though distressed homeowners believe that all their debt is gone. Some of the debt might even count as income for tax purposes, so it really pays to have someone legally familiar with these situations to best determine a course of action.
0 votes Thank Flag Link Wed Feb 6, 2013
Thanks for the response. My client was wondering if the deed in lieu or a short sale would be best. I told him to seek legal advice to explore all the repercussions because I read up on so many things that can go wrong. I hope it works out for him!
Flag Thu Feb 7, 2013
Without giving you any legal advise, let me tell you a quick story. I received a call from a client who told me that he had filed bankruptcy and he believed it was discharged approx 3 years ago. Thinking he was past the 3 years waiting period in order to qualify for an FHA loan, he wanted me to run his credit and take his application. Before I did, I asked him, "When did your house finally go into to foreclosure?" He said, "I don't exactly know". Well the next thing I did was to run the address and believe it or not, the home had still not been foreclosed and was still showing in his name. I called him back and told him the news and he was absolutely shocked. So he asked me what now? Unfortunately, I told him, your waiting period doesn't start with your BK Discharge date, but the date of the Trustee Sale. So in this case, what do you think I suggested that he do? So in some cases, you can see that a Deed in Lieu of, is simply the fastest way to bury bones and get on with your life. With all the MERS debacle with all the now defunct lenders, there are homes out there that the banks simply can't foreclose on because of the some the fraud that was done. So be careful! Seek the advise of an Attorney, some things like past due HOA dues or County Taxes can follow you even after the deed is transferred so you have to cover your bases and make sure those things are addressed.

Best of Luck!
0 votes Thank Flag Link Sat Feb 2, 2013
Thanks for the story. I have a few potential short sale clients ask about it. I refer them to some Fannie Mae website with a short explanation and also tell them to see advice from an attorney. I just haven't heard much of anyone having success being approved, but I am guessing if they had been approved for the deed in lieu, they wouldn't need an agent!
Flag Sun Feb 3, 2013
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