Banks Turning to Deeds-in-Lieu of Foreclosure?

Short sales and loan modifications have grown , but banks are also turning to deeds-in-lieu of foreclosure more too. 20,000+ deeds-in-lieu of foreclosure occurred nationwide in 2012,  up nearly 40 percent from 2011, according to RealtyTrac.

For example, deeds in lieu of foreclosure skyrocketed 76 percent year-over-year in California, 53 percent in Nevada, and 49 percent in Florida.

Deeds-in-lieu of foreclosure permit a lender to take  a home without having to undergo the foreclosure process. The home owner is allowed to leave their mortgage debt and avoid foreclosure by turning over the home to the bank. Often times, a deed- in-lieu of foreclosure offers “cash for keys,” providing a cash payment to the distressed home owner in order for them to vacate the home, without letting the home fall into foreclosure.

Source: “Deeds in Lieu of Foreclosure: Naughty or Nice?” Forbes (April 23, 2013)

Underwater Sellers, what are your Options? Cash to Short Sell? Cash for Keys? Foreclosure?

We get these questions and would like to share our thoughts about this dilemma.  Some home owners who are underwater may not know their alternatives.

The “Cash for Keys” is a program that banks do for some home owners. The “new twist” you’ll be hearing more about is “Cash to Short Sale”. Lenders are figuring out that if there is anything they can do to make a deal happen, they need to do it. This apparently is what is starting to take place with people that are trying to “short sale” their homes. Instead of “Cash for Keys” to homeowners that lose their homes to foreclosure. This was not offered to home owners who were trying to short sale their home. Often the banks would basically give them a certain time to complete the short sale until they foreclosed.

Now because of tight lending practices, new buyers would take so long to qualify, it is often “too little, too late” to close escrow before foreclosure.  When that happens it seems everybody loses. The lenders lost a willing & able buyer and the seller because, now, not only did they lose their home to a foreclosure, but also because a foreclosure was now on their credit report instead of a short sale. (It may be better to have a short sale than a foreclosure on a credit report?) Plus, the buyer may or may not wait until the home came back on the market at a later date.

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