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Pros and Cons of the Deed in Lieu of Foreclosure


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There are good and bad things that come with the deed in lieu of foreclosure. If you are unable to make the monthly mortgage payments on your home anymore you might consider this as your option. There are pros and cons to this which might help you make your decision.

Pros / Positives

The biggest positive of the deed in lieu of foreclosure is that your credit doesn't suffer as much as it would if it displayed a foreclosure. A foreclosure looks really bad on your credit and it can stop you from being able to buy another home for at least 10 years. No one wants a foreclosure on their credit. Being able to avoid this is a really good thing.

The deed in lieu has another positive aspect that it can happen quickly. The quicker you are released from the mortgage payments each month then the less you owe on the back payments and penalties for late fees. Many banks forgive the penalties, late fees, and back payments while others will come after you for it. The quicker you sign over the title to the home the less money you may owe.

Cons / Negatives

Some people look at the time factor as a bad thing. The sooner you sign the title over in a deed in lieu of foreclosure means the sooner you have to be moved out of the house. Some people live in their home up until the day the sheriff's office comes to evict them out. This can be up to a year of free rent in a place. A deed in lieu needs to take place quickly upon you realizing you cannot sell your home.

The bank also has a requirement for people who want to sign over the title to their home for a deed in lieu of foreclosure. This requirement is that you attempt to sell the house first. You will have to register the home with a real estate agent. You might have to pay for an appraisal and fees for an agent. If you don't have any money this may be tough for you to get through the process of working with the bank.

One of the things you must think about is that you cannot be eligible for a deed in lieu of foreclosure if there are any liens on the property. If there are liens on the property, there is no way you will be able to avoid the foreclosure unless you pay up the back payments you have missed on and keep the home. Chances are good you are looking forward to a legal battle also if there are liens.


There are many pros and cons of a deed in lieu of foreclosure you might consider if you are no longer capable of making the monthly payments for your home. You can benefit from not having a foreclosure on your credit record and being free of the debt sooner. It is important to keep in mind that you should be entirely moved out of your home when you are considering a deed in lieu of foreclosure.

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