What is a Deed in Lieu of Foreclosure?
A deed in lieu, or a deed in lieu of foreclosure, is a voluntary conveyance of a mortgaged property by the borrower to the lender. The interest in the property is often exchanged in order for the loan borrower and their guarantor to be released from some of the liability, or all of the liability, that they face under the loan.
Before deciding to pursue a deed-in-lieu transaction, borrowers and lenders should consider the costs and benefits relative to a traditional foreclosure. Voluntarily surrendering your ownership of your property to your lender can be one of the most practical ways to prevent that lender from foreclosing on the property. There are advantages to explore with this option, as well as some drawbacks that should be carefully considered.
To further discuss your own case relating to any foreclosure defense issues you may be effacing, contact the esteemed legal team at Suncoast Civil Law.
A Deed in lieu of foreclosure or simply deed in lieu not only helps you avoid public sale or auction of your property, but also helps you rebuild your credit sooner than you would after going through a foreclosure.
What is a Deed in Lieu of Foreclosure?
Deeds in lieu of foreclosure allow borrowers to convey interest in real property to their lender. By conveying this interest, they are ideally satisfying their loan and avoiding foreclosure.
Requirements to be Considered for a Deed in Lieu
For your property to be considered for a deed in lieu:
- indebtedness must be secured, and
- both sides must enter into an agreement voluntarily (it must be a good-faith transaction) and
- The settlement value must be at least equivalent to the property’s fair market value. This makes up the requirement for the agreement to have total “consideration.”
Given the above, some lenders may not agree to proceed with the deed in lieu if the borrower’s outstanding debt is more than the property’s current fair value. Experienced foreclosure defense attorneys at Suncoast Civil Law can help to further tease out the details you need to know. It is important to note that neither the borrower nor lender is required – or compelled – to proceed with this kind of transaction.
Pros and Cons
The end-of-the-day results can be very similar, whether you pursue a deed in lieu of foreclosure or a traditional foreclosure. However, a traditional foreclosure is often more lengthy and costly. There are, of course, certain pros and cons to consider when entering a deed in lieu of foreclosure. Such as:
- Credit score: taking a defaulted loan all the way to the finish line with a foreclosure proceeding can mean months of missed payments and a defaulted mortgage clobbering your credit score. Creditors may consider a deed in lieu to be a less severe offense.
- Taxes: The IRS views forgiven debt as income, and they may tax you accordingly. It is important to ensure you fully understand the consequences of any choices you make when it comes to a foreclosure or deed in lieu of foreclosure action.
Contact Suncoast Civil Law
If you find yourself looking for solutions in your own foreclosure situation, it can be difficult to know where to turn or what your options might be. There is help available and professionals who can help you navigate your next best steps. Contact the esteemed Sarasota foreclosure defense attorneys at Suncoast Civil Law to begin speaking with our experienced team.
Sources:
natlawreview.com/article/to-deed-or-not-to-deed-question-pros-and-cons-deed-lieu
bizjournals.com/southflorida/news/2025/02/26/miami-beach-office-building-lincoln-place.html