Posted by Rick, the Probate Guy on April 26, 2007 at 10:19:51:
While laws vary widely from state-to-state, lenders are very reluctant to accept deed-in-lieu of foreclosure because the lender receives the property subject to all of the junior liens and typically becomes responsible for their satisfaction.
Then, the lender is stuck with the debtor’s baggage. Lender can’t foreclose to wipe off junior liens because, of course, they’ve entered into an agreement whereby they agree not to. A catch-22.
If there are no junior lienors, this might work however deed-in-lieu transactions are pretty rare in this litigious world. They were more prevalent during previous real estate downturns.
Your whole plan is based on getting the borrower’s cooperation, which is pretty hard to do during an adversarial time like a default. Lastly, they could change their mind and file BK and ruin your day in a big way.
I suggest you look for a buyer with either a larger down payment or a co-signor with more collateral with equity.