On its surface, a Deed in Lieu of Foreclosure looks very much like a short sale—but without the house going on the market. You are voluntarily offering to give the bank ownership of the property to satisfy your loan.
To an inexperienced practitioner, it seems simple. They might gather a short sale package, submit it, and ask the bank to take the deed. But an experienced Certified Underwater Real Estate Expert knows that the timing, the negotiation, and the legal leverage are what make a Deed in Lieu actually succeed.
In the first few years of the last housing crisis, Deeds in Lieu worked beautifully. Eventually, the market crowded, property values became unpredictable, and banks started rejecting them, forcing homeowners into traditional short sales instead.
But as the market shifts again, the early-cycle opportunity for a Deed in Lieu has returned.
If you want out of your property with the least amount of damage possible, the standard advice from a regular Realtor might be to stop making payments to trigger a short sale review. This is dangerous and often unnecessary.
While banks frequently refuse to process a short sale if you are current on your mortgage, a Deed in Lieu can sometimes be negotiated while you are still current.
By leveraging the right legal arguments and positioning, we have successfully gotten banks to accept a Deed in Lieu without forcing our clients to miss payments and destroy their credit first.
"In a recent market cycle, we had a client who needed out. We put the package together and I got on the phone with a 15-year loss mitigation veteran at a major bank. I explained exactly why taking this property back *now*—rather than forcing my client into a prolonged short sale—was vastly more beneficial for their investors."
This is the difference between hoping the bank helps you, and having an experienced Attorney-Realtor team negotiate on your behalf.