How does a person negotiate a deed in lieu of foreclosure?

| Sep 19, 2019 | Firm News |

Arranging to surrender your home to a lender with a deed in lieu of foreclosure is one way Michigan property owners avoid foreclosure. While this option is attractive for homeowners, banks and other lenders may hesitate to move forward with a deed in lieu since they lose rights to recover particular debts. Property owners offering a deed in lieu should be aware of how to make the best case for themselves to their lenders.

SFGate explains that a major factor in negotiating a deed in lieu of foreclosure is to prove that you are in financial straits and that paying off the mortgage is not feasible. You would likely prepare financial documents that demonstrate your income and assets and present the paperwork to your lender. If your finances are dire enough, you might mention the possibility of filing for bankruptcy, which could motivate the lender to accept your offer.

Not all homeowners feel confident about approaching a lender by themselves. Some people decide to hire a foreclosure attorney to help them compose a deed in lieu and then have the attorney present the deed to the lender. Working on the deed with legal counsel is a good stage to go over possible options and negotiating tactics, such as whether mentioning a possible bankruptcy filing to a lender is a good idea. You also need to know what your fallback choices are if your negotiation fails.

Even if your deed in lieu offer is accepted, it is important to make sure there are no paths for the lender to do damage to your credit or pursue you for unpaid debt. Talk with your lender about how your lender will report your deed in lieu to credit bureaus so that a negative report is not sent that damages your credit score. Also make sure in writing that your lender will not pursue you for financial losses suffered from accepting the deed in lieu.

The complications involved in offering a deed in lieu of foreclosure makes consulting with legal counsel important so that your negotiation with your lender has the best chance of succeeding. Since homeowners facing foreclosure have varying needs and concerns, only read this article as information and not as actionable legal advice.