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Hypothetically...deed in lieu


Methuss
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As a curiosity and only hypothetically...

Lets say you have trouble selling a house you no longer live in. No bad reason, just the market is softer than originally thought. You are not late on payments and can, for a while, manage to continue making payments. The house is fair-valued at slightly more than the outstanding mortgage balance, say 10k. It is possible to rent it, but you just don't want to get into being a landlord.

Is it possible to do a deed in lieu if you are not behind on payments just to get it done and over with? In answering that consider that eventually (six months) making payments will not be sustainable and the borrower knows it for fact.

Since this is a settlement for full value (remember market value is higher than debt owed), it just closes the account with no negative effect so long as there are no late payments, correct?

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Eh. Well...It was just an idea I was toying with. The house I have will eventually sell...I'm just being impatient.

But as a backup plan if it does not sell and it becomes unsustainable to keep paying...I suppose it would be better to run up one or two lates then do a deed in lieu offer rather than foreclosure. It would hurt me less credit-wise in the long run right?

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Typically, banks/mortgage companies do not sell houses at fair market value. Some will try and get a fair value, but many will sell at a discount to get out of it. They are not in the real estate business; they are in the lending business. What generally happens is they sell it for a loss and you owe the difference.

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What generally happens is they sell it for a loss and you owe the difference.

True of a foreclosure; but a deed in lieu is a total liability release. Mortgagor does not owe anything more if it is accepted. The advantage to the bank is in not having to go through the time and expense of foreclosure proceedings.

That's why I was sniffing around this subject.

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