Deed in Lieu of Foreclosure

No surprise.

Lenders (first mortgagee) will rarely accept a DIL unless all efforts to sell have been exhausted. Too many distressed homeowners are misinformed as to the feasibility of stated non foreclosure alternatives. Boilerplate foreclosure advisory letters sent to the homeowner by the lender will list a DIL as a non foreclosure alternative... but in the 25 years and thousands of preforeclosure scenarios I've worked... I can count on one hand the number of DILs I've confirmed as having been accepted by the lender.

There may be portfolios of loans in default considered predatory which may be resolved by the lender taking a DIL to avoid regulatory scrutiny... but these are the exceptions. 

non profit preforeclosure counseling (for realtors, too!)

Thanks to all about the true stories regarding DIL.  I had a client who did try to do one after we tried to sell the home as a short sale.  The short sale was approved but only if the sellers would agree to take unsecured loan for the shortfall.  They were so tapped out that was not even feasible for them.  They then tried to do a DIL.  My associate noticed recently an NOD was filed so it is only a matter of time before the trustee sale comes up.

Is the bank willing to short the sale?? They may accept that even though not the DIL was not accepted. That is the bad thing working foreclosures - loans are sold off to different investors and in different packages, so one time they may say YES the next no.  Good Luck!

Whether a DIL, or short sale, don't forget about the 1099 tax consequences.

• An Ethical Approach (to short sales)

Check out Bill HR1876 that has passed in Senate and now waiting for Congress to decide what they will do with it. I wrote a post on this as it was introduced back in March 2007.  It is a bill that if passed with give relief to those that are victim to pre-foreclosure/foreclosure short sales.  Be on the look out for it.

See my post: Tax Relief from Short Sale - will it pass? HR 1876

Not promoting my post, but it is some good information to know about an update on short sale tax relief.

From what I know, if it is a trustee sale - there is no 1099.  But check further on this and I will too and come back and let you know my findings.

I think this has been said.  Don't give up so quickly.  These mortgages change hands often and when 1 say no -- go to the next one.  They also may need to look into Chapter 13 and still keep trying to sell the property before it actually foreclosed.

Check with Mike Mueller's webiste -- he's got more information on there regarding short sales.  Good luck and if you need more information remember those sites as well as my blog Mother and Daughter Blog and so many experts on the subject. But don't give up -- might have a couple more options to use.  And by that time, they may rethink taking an offer. lol