Foreclosure in 60156>Question Details

Mommyof3, Other/Just Looking in 60156

how does dee in leiu of foreclosure work?

Asked by Mommyof3, 60156 Sun Feb 13, 2011

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It is a negotiation between you and the bank to turn over the home in lieu of foreclosure. This is the easiest form of avoiding full blown foreclosure but do be advised it is a form of foreclosure and will affect your life for some time to come. (see below)
Many Realtors will suggest Short Sale instead of deed-in-lieu-of, I would just like to let you know short sale and deed-in-lieu-of are equal: both are a negotiation with the bank, both could net you cash for keys, both can be negotiated so that you are not responsible for any deficiency or an amount less than the whole deficiency, where the difference lies is in who is involved: deed-in-lieu-of is just you and the bank maybe attorneys if you wish, short sale involves you, your Realtor, potential buyers, their Realtors, the bank and attorneys for all parties involved, not to mention listing your home as a short sale publicizes you are in trouble and every Tom, Dick and Harry will be pounding on your door trying to get a deal (better known as stealing your home not that the bank isn't already attempting to do that).

Ramifications of Foreclosure, Short Sale or Deed-in-lieu-of Foreclosure

Here are some of the ramifications of foreclosure, short sale or deed-in-lieu-of-foreclosure, there are many more like; insurance rates, your job (yes employers are checking credit records these days).

Your credit score will be reduced by 200-400 points, short sale and deed-in-lieu-of a little less 100-200 points.

All forms of foreclosure stay on your credit report for 10 years.

After you have gone through foreclosure, short sale or deed-in-lieu-of-foreclosure there will be what is known as the "waiting period", this period of time varies for each and can be reduced if you had some type of extenuating circumstances that caused the foreclosure:
Waiting Periods to Buy After Foreclosure – “YES” Short Sale and Deed-in-lieu-of are forms of foreclosure
• Buying after a Walk Away Foreclosure
The waiting period is 7 years
• Buying after a Foreclosure
The waiting period is 5 years with 20% deposit up to 7 years.
• Buying after a Foreclosure with Extenuating Circumstances
The waiting period is 3 years with 10% deposit up to 7 years.
• Buying after a Deed-in-Lieu-of Foreclosure
The waiting period is 2 years with 20% deposit, 4 years with 10% deposit up to 7 years.
• Buying after a Deed-in-Lieu-of Foreclosure with Extenuating Circumstances
The waiting period is 2 years with 10% deposit.
• Buying after a Short Sale
The waiting period is 2 years with 20% deposit, 4 years with 10% deposit up to 7 years.
• Buying after a Short Sale with Extenuating Circumstances
The waiting period is 2 years with 10% deposit.

In addition to the waiting period and minimum down payment, you will be required to have a minimum FICO score and the home purchase must also be the principal place of residence, not a rental nor a vacation home.

Lastly, most loan applications will ask the dreaded question "Have you ever been foreclosed on?" this stays with you for life, many think that because it will not show up on the credit report after 10 years they can answer "no", well lying on a loan application is a felony that carries a major jail term, so be aware.

Good Luck
Bob Patrick
Buy a home after foreclosure, short sale or deed-in-lieu-of expert
Movin-On LLC
Helping families/people that have lost their homes get back into another in as little as 6 months
0 votes Thank Flag Link Tue Feb 15, 2011
You have posted several very good questions. They point out how complex the current market is. The correct solution is different for each individual situation. It would be best to consult a Real Estate Professional in your area who has experience working with clients who have faced these challenges in the past. In addition I recommend all my clients to consult a Real Estate Attorney to make sure they understand all the benefits and consequences of whatever choice they make. The attorneys I work with would answer those questions without charge to you. It may be possible for you to get all the answers you need without incurring any costs.

You have taken the first step in moving toward your future by asking the questions, keep up the good work.
0 votes Thank Flag Link Mon Feb 14, 2011
Here's a good link to questions and answers about deed in lieu of foreclosure
http://www.mortgagefit.com/deed-lieu.html

Do note, though, that although you are saved the embarrassment of being evicted from your property when it is foreclosed, your credit will still take a huge hit, and this will remain on your record for several years, just like a foreclosure.

If you are having a hardship paying your mortgage, explore other avenues to either save your home, or save your credit. Contact your mortgage company and get counseling on what you can do, such as getting your loan modified.

Ask them about HAFA (Home Affordable Foreclosure Alternative) http://www.makinghomeaffordable.gov/programs/exit-gracefully…

and HAMP( Home Affordable Modification Program) https://www.hmpadmin.com/portal/index.jsp

And if you don't qualify, try to do a short sale than merely walking away. Although short sale may be time consuming and will required you to provid a lot of financial documents, at least the effects on your credit will be shorter and less devastating than a foreclosure.

God luck with whichever option you choose.
0 votes Thank Flag Link Mon Feb 14, 2011
The Deed in Lieu is a simple document that helps the lender acquire the property back with the borrower defaults. This type of documents are primarily used in private financing or hard money loans.
If you have any questions or scenario, pleases don't hesitate to ask.
All the best
Thanks
Munish
0 votes Thank Flag Link Sun Feb 13, 2011
You save the bank the cost of foreclosing on your property and just sign over the deed to them. Most banks will ask you to do a short sale first, though, because they don't want your property. They just want their money.

We are a professional short sale service and would be happy to explain the process to you. Please call us directly to discuss your specific situation. Our services are FREE to homeowners. We look forward to hearing from you.

Eli Givoni, Director
Short Sale Department, LLC
561-361-1909
info@shortsaledept.com
http://www.shortsaledepartment.com
Serving all 50 states
0 votes Thank Flag Link Sun Feb 13, 2011
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