Deed in lieu of Foreclosure-Pitfalls? - Posted by SCook85

Posted by Bud Branstetter on March 23, 1999 at 09:54:07:

I take it the attorney does not litigate. Many good RE attorneys do not and prefer it that way. Find a good one that litigates. As far as bankruptcy-while the court can up to a year I have only heard of them going back about 6 months. Once it has been resold they prefer to pull it back even less. No assuances. If you give a deed, make it a special warranty not a general warranty.

The most important thing would to be to regain possession. Most mortgage /deed of trusts have some provision about collecting rentswhile in default. The IRS has said treat that income as rental even though you don’t have legal title.

The problem with a deed in lieu is that it does not clear judgements against the individual. You can get title insurance. My attorney has said foreclose even if you have the deed in lieu of. If you can regain possession foreclose while doing a rent to own.

Deed in lieu of Foreclosure-Pitfalls? - Posted by SCook85

Posted by SCook85 on March 23, 1999 at 08:02:06:

Have a concern here about how to best resolve this situation. My partner sold a home back in January to a guy on a wrap around mortgage. The guy missed his first payment, missed his second payment, got caught up and hasn’t paid since. The guy put $7000 down on a $66000 home. It turns out that he is really bad into drugs, can’t keep a job and is a complete dead beat.
We talked briefly with our attorney yesterday about this situation and how we were having trouble tracking the guy down. The attorney suggested that we have deed in lieu of foreclosure drawn up and carry it around with us, so that if we saw him we could just have him sign it and be on our merry way. Well we caught up with the Buyer last night who is never anywhere to be found. He agreed to sign a deed in lieu of foreclosure if we paid him $2000. This would be a very cheap solution for us. But our attorney told us this morning that if this guy decides to file bankruptcy then the deed in lieu of foreclosure can be put into the bankruptcy and we would have to foreclose anyway.
In regards to my question and people who take a deed subject to the existing financing are they protected from the owner filing bankruptcy. Is there a time limit that they have to file bankruptcy. What if I took a deed in lieu and immediately sold the home to someone else, could it cause problems?

I need a quick solution. We have a deadbeat who is willing to cooperate if we can move quickly, the problem is he has mentioned bankruptcy and our attorney is scared.


Re: Deed in lieu of Foreclosure-Pitfalls? - Posted by Rob FL

Posted by Rob FL on March 23, 1999 at 22:12:20:

In FL anyway, if there is special wording in the deed in lieu which basically says “this deed does not create a merger of title with the mortgage and mortgagee may still foreclose” this allows the mortgage to be foreclosed later on if necessary. You would need an attorney to draft the deed. If possible, go for the deed in lieu if you can.

Re: Deed in lieu of Foreclosure-Pitfalls? - Posted by Irwin

Posted by Irwin on March 23, 1999 at 21:27:14:

IMHO, the deed in lieu NOW, is a “bird in the hand” . There might be b/k problems, and/or liens to be cleared down the road, but that’s the “problem in the bush”. DIL gives you the right to immediate possession, and that, I believe, is crucial. Then, “Que Sera, Sera.”