A deed in lieu of foreclosure is an agreement between a homeowner and mortgage lender where the homeowner will voluntarily give the deed of their home to the mortgage lender to avoid foreclosure on their home. A deed in lieu agreement may not be the best decision for all homeowners, but it could be an option for those who have exhausted all other resources to stop foreclosure or want to prevent bankruptcy and subsequent damage to their credit score.
Although a deed in lieu of foreclosure avoids foreclosure, it should still be a homeowner’s last option. If you are a homeowner facing foreclosure and don’t want to give up the title of your property with a deed in lieu agreement, you may find some solace knowing that you have other options to stop foreclosure on your home.
To figure out how you can delay or stop your foreclosure, call Denbeaux & Denbeaux Law today to discuss your options with a trusted NJ foreclosure defense attorney.
Is A Deed In Lieu Of Foreclosure Right For Me?
In most cases, a homeowner should explore every other form of foreclosure avoidance before deciding that a deed in lieu agreement is the right choice. Forbearance, loan modification, and a short sale are all different options a homeowner can take, just to name a few. However, there are specific qualifications a homeowner needs to be eligible for other forms of loss mitigation.
You might feel like you have tried all other options to save your home from foreclosure, and getting a deed in lieu is your final hope. In that case, you should consider the advantages and disadvantages of getting a deed in lieu of foreclosure on you and your financial future before making such a significant decision.
Before you decide to use a deed in lieu of foreclosure, speaking with a foreclosure attorney may help you understand if it is indeed the last option you have. Contact us to talk with attorney Josh Denbeaux about your situation.
Advantages Of A Deed In Lieu Of Foreclosure
Although a deed in lieu of foreclosure may not be the best option for everyone, homeowners should consider the advantages of acquiring a deed in lieu of foreclosure, especially if you have already exhausted other forms of foreclosure avoidance. Some benefits include:
- Less Damage To Credit Report. A deed of lieu agreement causes less damage to your credit report when compared to a foreclosure or bankruptcy. A deed of lieu of foreclosure is on your credit report for four years compared to the seven years foreclosure is shown.
- Receive Moving Assistance. There are cases where the lender is willing to help pay for moving costs and may assist in relocation if they want to take control of the property quickly. The lender isn’t required to help, though, so this can be denied when requested.
- Avoid Further Financial Loss. In New Jersey, you could be held liable for the difference between the cost of the property and how much you owed the lender, also known as a deficiency judgment, but you can negotiate this. When negotiating a deed of lieu agreement, you can ask the lender not to hold you liable for that debt.
- Less Publicity. When a homeowner goes under foreclosure, they are notified by a foreclosure notice which is typically attached to the front of your door for all neighbors and passersby to see, which can be embarrassing to some. For that reason, homeowners would rather just give their home to the lender in a deed in lieu of foreclosure to avoid the public eye.
These advantages might make a deed in lieu of foreclosure seem like a good idea, but there are numerous disadvantages that one should keep in mind. It could seriously impact the homeowner and future home buying prospects. A deed in lieu of foreclosure should not be taken lightly and should only be pursued when it is the last option.
Disadvantages Of A Deed In Lieu Of Foreclosure
Although a deed of lieu may seem to be the better option for you and your situation, there are still significant drawbacks that it causes. A homeowner should know these before proceeding with a deed of lieu agreement:
- Still Causes Significant Damage To Credit. A deed of lieu of foreclosure will still be reported on your credit for the next four years, making it difficult or nearly impossible to receive a mortgage anytime in the foreseeable future. Your credit score will also receive a minimum of negative 125 points.
- Tax Liability. Certain cases require the homeowner to be held responsible for paying taxes on the debt forgiven by the mortgage lender since it can be considered taxable income.
- Not Guaranteed. A lender does NOT need to agree with a deed in lieu of foreclosure. They have the right to refuse and may do so. A lender could refuse if the property is depreciating in value or if there are any liens on your property since assuming ownership of the property would be non-beneficial to the lender.
- Loss Of Property. This disadvantage is a given in this situation. You will lose your home to the bank, considering you voluntarily give up your home and the rights to fight against foreclosure. You’ll have to move out quickly in most cases.
Although getting a deed in lieu of foreclosure can have some benefits, the disadvantages usually outweigh the good. Ultimately, how you decide you want to avoid foreclosure will be up to you and what option is best for your particular situation. If you want to know all your options, you can contact Denbeaux & Denbeaux Law today to set up a free consultation.
Still Have Questions? Contact A Foreclosure Attorney Today
Deciding whether or not you should get a deed in lieu of a foreclosure agreement can be challenging. The agreement can trick homeowners into believing they don’t owe anything to the lender, servicer, or state and later be held liable for some payment.
A deed in lieu of foreclosure could be helpful for your situation, but it should be the last option you pursue as a homeowner. You can get help from a knowledgeable attorney to see if there’s anything else you can do to save your home from foreclosure before resorting to deed in lieu of foreclosure.
Denbeaux & Denbeaux Law has helped represent over 2,000 NJ homeowners since 2008, which has allowed us to gain extensive knowledge and experience assisting homeowners through the foreclosure process by offering foreclosure avoidance services like loan modifications, forbearance, loss mitigation, and more.
Contact us today for a free initial consultation with Joshua Denbeaux and learn more about how we can help you.
