A deed in lieu of foreclosure is an alternative to foreclosure or a short sale. A deed in lieu is the process of a home owner transferring ownership of the property to the lender in exchange for the mortgage loan being cancelled. This is done by signing over the deed to the lender.
Depending on the circumstances, a deed in lieu may be the best option if a home owner can no longer afford their mortgage payments and it definitely beats foreclosure.
When faced with foreclosure, one of the alternatives you will probably hear mentioned is a deed in lieu. A deed in lieu is similar to a short sale in that you agree to forfeit the home, and proceedings will immediately begin with the aim of selling the home.
The difference is who sells the home on the market. In a short sale, it’s your job to find a buyer. With a deed in lieu of a foreclosure, you transfer the home back to the lender immediately, and the lender is then responsible for finding a buyer.