What is the meaning of deed in lieu?
A deed in lieu of foreclosure is a deed instrument in which a mortgagor (i.e. the borrower) conveys all interest in a real property to the mortgagee (i.e. the lender) to satisfy a loan that is in default and avoid foreclosure proceedings.
What are the benefits of a deed in lieu?
Advantages of a Deed in Lieu of Foreclosure
- It allows you to avoid or minimize any deficiency on your mortgage. That’s the loss the lender takes on the difference between the current, fair market value for your home and the balance of your home loan.
- It may give you help moving.
- It could reduce the hit to your credit.
Can I buy a house after a deed in lieu?
Although a deed in lieu negatively impacts your credit history, it still is possible to buy another home in the immediate future. It may take at least two years to become eligible again.
Which is better short sale or deed in lieu of foreclosure?
A deed in lieu of foreclosure is different from a short sale because it transfers the property to the lender instead of selling it to a new buyer. Most lenders find this option less appealing than a short sale because they will need to handle the logistics of the sale instead of the homeowner.
Is it better to short sale or deed in lieu?
How does deed in lieu affect taxes?
When recourse debt is involved in a deed in lieu of foreclosure, the transaction typically results in cancellation of debt (COD) income. If the debt exceeds the property’s FMV, the excess is treated as COD income taxable as ordinary income unless an exclusion applies (see below).
Which is worse foreclosure or deed in lieu?
Though a deed in lieu will show up on your credit report, its impact isn’t as severe as a foreclosure. Your lender must go through the proper legal channels to remove you and take back control over the property in the event of a foreclosure.