Will bank take back property with deed in lieu of foreclosure? will this hurt my credit?

Question

I have 2 rental properties both of which are in danger of being forclosed. I have trid to sale and to rent to them to no avail. I have heard of deed in Lieu of foreclosure. How does this work? I do own one other property which has some equity. Will bank take deed in lieu of foreclosure and forgive any remainging debt or will they go after me for any shortage?

Thanks for the responses so far.
I have the properties on the market and have had no offers. Even willing to sell $20,000 below what I paid which will be a net lose of $40,000.00 There are a ton of similar properties on the market, very few are actually selling and more are coming on the market. I have run out of cash. This looks and feels like doom.

Answer 1

here you go.
Before choosing to go with the foreclosure, you should look into a few other options first. Refinancing is the option that most homeowners attempt first, but credit/income and tighter lending have precluded most homeowners from qualifying for a loan right now.

Either way, you should list the house on the market just on the off-chance someone wants to purchase it before the foreclosure goes through. You can also try to work with the lender for a short sale, where you'd sell the property for less than what you owe on it. At least it will pay off the loan and save your credit a bit.

If that doesn't work, ask the lender about giving a deed in lieu of foreclosure. That works as just giving the property back to the bank, and they can't go after anything else. They accept the deed instead of foreclosing or paying the loan, so there's nothing else for them to go after. This is only slightly better than a foreclosure, but anything you can do to preserve your credit will help at this point.

It will depend on how the bank pursues the foreclosure if they can sue you for another judgment and go after any other assets. With just the foreclosure, though, they are not entitled to anything else. You pledged the house as collateral for the loan -- not your car, 401(k), or prize racehorse. So all that they can take as payment for the loan is the house.

Look up California's state foreclosure laws and consult your loan documents to determine what kind of foreclosure the bank can proceed with (Judicial or Non-Judicial). That will tell you if they can sue you afterwards and try to go after any other assets.

Banks rarely sue for deficiency judgments, though, since they know that foreclosure victims don't have a lot of extra cash or even the ability to borrow any money. It costs the lender extra time to sue you and there's no guarantee they'd be able to collect on the judgment, so most don't bother with the judgment at all.

Hope that helps.

ForeclosureFish
http://www.foreclosurefish.com/...
Source(s):
Short sales: http://www.foreclosurefish.com/blog/inde...
Deed in lieu of foreclosure: http://www.foreclosurefish.com/deedinlie...
California foreclosure law: http://www.foreclosurefish.com/ca.htm...
Deficiency judgments: http://www.foreclosurefish.com/blog/inde

Answer 2

You need to call your lender and ask this question, as many lenders differ in procedures. Not all banks will accept your request to do a deed in lieu of foreclosure. Unless a person on yahoo works at the lenders you are about to go into foreclosure with, they will not be able to answer this question correctly.

What you can do is put the house up on the market RIGHT NOW, CALL AN AGENT, RIGHT NOW!! You can advertise in the paper something along the lines of "buy my house before it forecloses", which will attract investors. The investor may try to negotiate a short sale with the bank (the bank may or may not accept that). In the negotiation from the buyer, there should be a clause added in the offer that states if the lender accepts their offer for a short sale, that the lender will not try to sue you for any deficiency balance, or take any further recorse against you for fees. This is done frequently in Ohio where I moved from. The legal clauses and forms may vary from state to state, and should be reviewed by a real estate attorney. Most real estate attorneys don't charge too much to review a document (the one I had look over my contracts only charged $25 per document).

If the property is in NC or SC, you can also advertise it on my site for free:

http://www.brokershawna.com

You should do whatever it takes to stay out of foreclosure. You may want to consider contacting an attorney as well and see what your options are financially as well as legally.

Answer 3

Hi, I'm a real estate agent in California's San Francisco bay area.

Good answers so far, but why can't you rent or sell?

Do you want to keep the properties? If so, and you have no money to fix them up if needed, get a second mrtg. if you can and do so to some extent.

Contact an agent in your area and see if they have clients to rent, or what they'll list it for if you want to sell.

In the months ahead and after Christmas, it'll be a better market for sellers.

Some are taking negative news on real estate to serious. it's not "the sky is falling" scenario for everyone.

Every year at this time, there's a real estate shake out of one type or another. So hang on if you possibly can, because it will affect your credit for a long time to come, and there's nothing like owning real estate.

Sincere best, Richard

Answer 4

If you can't re-rent the house, either option with the bank will hurt your credit. However, banks seem to be more willing now to work with people in your situation because they don't want any more houses than they already have. So call them and see what they might be willing to do (postpone payments giving you more time to sell, etc.). You might be surprised.