Dealing with a looming foreclosure on your home can be extremely unsettling, and many homeowners are more focused on ending the situation than searching for the options that are best for them. In order to protect your future, however, Ahmad Sulaiman a foreclosure attorney in Oak Brook, urges you to seek representation from an experienced lawyer in your area before negotiating with lenders.
As a respected foreclosure lawyer in the Chicago area, Sulaiman has approached the financial struggles of his client’s with various methods that he believes worked best for their particular situation. Here, he explains just one of those options: a deed in lieu of foreclosure.
What is a deed in lieu of foreclosure?
Much like a short sale, or other forms of loss mitigation, a deed in lieu of foreclosure is another way to extinguish the rights you have to your home in order to settle the debt you owe to lenders. By accepting the deed in lieu of foreclosure, the bank will, in most cases, free you from liability on the loan, also known as a deficiency.
How is this different from foreclosure?
From both the lender and the homeowner’s perspective, agreeing to a deed in lieu of foreclosure is beneficial. Basically, the homeowner is extinguishing his rights to the home before the foreclosure process begins, before any litigation takes place, and before any judgment. By doing so, his credit will not be as poorly affected as it would have been from foreclosure, and he doesn’t have to go public with the fact that he’s losing his home. From the lender’s standpoint, this option is favorable because either way the lender will gain possession of the home, and now the lender can avoid the costly foreclosure proceedings.
When should you present this option?
According to Sulaiman, you want to extinguish any liability you have as soon as possible. So, once you can no longer make payments on your home and there is no conceivable way for you to settle your debts, your foreclosure attorney should approach your lender with this option. Typically it will be the homeowner who comes forth with proposing a deed in lieu of foreclosure because, legally, both parties must enter this process voluntarily. And, if the lender is the one who first makes the proposition, he fears his intention could be misconstrued.
How do you secure a deed in lieu of foreclosure?
In order to be successful, the homeowner or his attorney must persuade the lender through negotiations that it is in his best interest to allow a deed in lieu of foreclosure to take place, says Sulaiman. Typically, if a lender agrees to go forth with a deed in lieu of foreclosure, he will lose roughly $20,000 to $70,000 from the profit of the original loan.
What are possible setbacks?
If you acquired your home with the help of a secondary lender, then the process of securing a deed in lieu of foreclosure can be quite tricky. Because of the loss of money that the primary lender takes, he may be unwilling to split the money with any other lenders who supplied smaller amounts of money to you. As a result, you the homeowner is stuck with other lenders who still have their hands reaching out for money.
Before you can proceed with the process, you or your attorney must settle with any other lenders who have an investment on your home. Sometimes, this could jeopardize the ability for the process to move forward, and you may end up in foreclosure regardless.
Why you need a lawyer?
Because of all the ins and outs of real estate law, including the high quantity of the money owed and the possibility of multiple lenders, you need an extremely experienced attorney who has represented clients in situations like yours before. As Sulaiman explains, any reputable attorney should comb through your files meticulously to look for any setbacks or errors made in your loan, and to assess which option is best for you.
As with most forms of loss mitigation, if you are considering a deed in lieu of foreclosure, then you will want to act as quickly as possible.
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Neither publication of this article nor your receipt of this article create an attorney-client relationship.
