Deed in lieu of foreclosure is a process where the homeowner gives the property back to the lender because they choose not to make mortgage payments, usually because of a financial hardship. The lender agrees to sell the property to receive a part or the entire amount of the homeowner's loan balance.

How does Deed in Lieu work?

When a homeowner chooses a deed in lieu option to avoid foreclosure, the homeowner must sign several legal documents such as the Warranty deed, Agreement in Lieu of Foreclosure, or a quit claim deed.

The lender agrees to sign off on the borrower's note as "paid" and provides the Agreement in Lieu of Foreclosure and the Warranty deed, which agrees to cancel the debt and to waive the right of deficiency judgment. The lender agrees that the homeowner will not be pursued if the unpaid debt is not fully recovered by the sale of the property.

Tax consequences to consider with Deed in Lieu

The IRS often gets involved with Deed in Lieu’s, because the deficiency that results from the sale of the property is typically forgiven by the lender. The deficiency forgiveness by the lender may be seen as a relief of debt and can be treated as income by the IRS. A homeowner should consult with a qualified professional accountant or tax advisor for specific details.

Loan Modification vs. Deed in Lieu

Mortgage loan modification is an option used by homeowners that desire to keep their home. If the homeowner prefers to walk away from the mortgage instead of keeping the home, a deed in lieu is an option for the homeowner instead of mortgage modification.

At LaBovick Law Group, our Loss Mitigation Team of professionals are experienced and devoted to assisting you in finding a workout solution. Contact our office today to find out your legal options. We offer a Free Consultation. You can fill out the form to the left for an assessment of your personal matter.

If you prefer to speak to us by phone, please feel free to call 888.777.3884 to discuss your personal matter with one of our professionals.

The Loss Mitigation Team at LaBovick Law Group assists clients throughout Florida, including Palm Beach, Martin, St. Lucie, and Broward counties, and the cities of Palm Beach Gardens, Jupiter, West Palm Beach, Boynton Beach, Stuart, Port St. Lucie, Delray Beach, Lake Worth, Boca Raton, Deerfield Beach, Fort Lauderdale and many other areas.