For a homeowner who is in default and wants to avoid foreclosure proceedings, a deed in lieu of foreclosure is a deed instrument where the homeowner conveys all interest in their home to their lender to satisfy their home loan.
This kind of transfer offers several advantages to both the homeowner and the lender.
The principal advantage to the homeowner is immediate release from most or all of the personal indebtedness on their defaulted loan. Also, the homeowner avoids the public notoriety of a foreclosure proceeding, may receive more generous terms than in a formal foreclosure and may cause less damage to their credit than in a formal foreclosure.
The advantages to a lender include a reduction in time and cost of repossessing the defaulted home and lower risk of intentional property damage caused by the homeowner.
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