What is the downside of a deed in lieu of foreclosure?

A deed in lieu of foreclosure means that you agree to turn over the deed to your home to your lender when you’ve defaulted or fallen behind in your mortgage payments. The deed in lieu of foreclosure option allows you to avoid the long process of being sued and having a foreclosure listed on your credit report. However, there are downsides to choosing the deed in lieu of foreclosure option. The largest downside that you give up your home. This means that you have to move and look for and look for another place to stay instead of fighting to keep your home.

Another downside is that you may still owe the lender even though they cancel the loan. According to Nolo, in some states a lender is allowed to sue to recover the money they lost. Let’s say you hand over the deed to the lender and the lender sells your home. However, your home doesn’t sell for the price on the outstanding balance you owe. This means that the lender can sue you to recover the difference.

A deed in lieu of foreclosure has another downside. You can’t hand over your home if you have a second mortgage with another lender.

Before you agree to a deed in lieu of foreclosure, talk with a lawyer. The lawyer can negotiate terms of the agreement to avoid paying any deficiencies. Also, the lawyer can advise you of any options you have when a deed in lieu of foreclosure is not possible.