I receive a lot of phone calls, emails and questions about Lakeland Florida short sales, foreclosure, and more and more I’m asked about Deed in Lieu of Foreclosure.
I am not an attorney and this information below is by no means legal advice, it is for your information only and is the opinion of the author.
Definition – In Florida, a deed in lieu is giving your house back to your lender instead of the lender follow through with foreclosing on the property owner.
This transaction is “easier said than done”. Although a Deed in Lieu of Foreclosure is similar to a voluntary repossession where you are signing over the deed to your property and the lender agrees to cancel the mortgage. There is, however, a long list of requirements that the lender requires the owner to complete; followed by an extensive evaluation and deliberation of your situation before you are permitted to sign over the deed to your property. Generally the lender draws up the Deed in Lieu of Foreclosure Agreement that must be signed by you the homeowner/grantor, witnessed and notarized. After execution of this agreement, the deed in lieu must then be delivered to the lender/grantee, which then will be recorded at the local clerk of court into the public records.
There are certain criteria you must meet first for your lender to accept a Deed in Lieu
- Lien free except for your mortgage
- Current on property taxes
- Current on fees, such as Homeowners Association, Condo fees, etc.
- Your offer to turn in your deed to the noteholder must be approved.
- It may be treated as a foreclosure when purchasing a home in the future
Please note that prior to engaging in a consensual deed in lieu, which may fail during the course of process that there are also specific requirements that you must adhere to. The borrower must have suffered a hardship such as loss of job, sickness, dissolution of marriage, etc;
- The property is generally an individual’s homestead or former homestead; hence generally not for abandoned properties or investment properties
- The borrower must have exhausted other options / financial resources
- The property must have been on the market at fair market value for at least 90 days
- No other liens may be recorded on the property, i.e. 2nd Mortgages, judgments from creditors, tax liens.
In some cases, the lender may still come after you with a default judgment. Negotiation is a must – you have to negotiate with the lender and require that they do not come after you after you turn in the deed for a deficiency judgment when they sell the home at a loss. Whatever the bank sells the property for they will come after you for the balance. But you may be able to get this waived.
You must get this in writing from your lender that they are going to waive their right to a deficiency against you and you have to get an attorney to review the paperwork to make sure you are in the clear.
There is also of course credit issue with short sale, deed in lieu, and foreclosure, which I will address in another blog – Stay tuned!
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Deed in Lieu of Foreclosure – Lakeland Florida Real Estate
Licensed Florida Real Estate Broker
CDV TransAtlantic, Inc.
P.O. Box 92050 – Lakeland, FL 33804-2050
Telephone (863) 618-6919