Submitted by Donner on Thu, 09/15/2011 - 08:36
Posted in
My mother passed away last year leaving a small house that had a mortgage on it and no other assets or debts, other than a couple of small utility bills. I'm the executor of the estate and the only heir and I'm trying to sell the house but so far the thing has not sold and I just want to get rid of it. The loan is slightly more than what the house is worth (according to my real estate agent). We are heading toward foreclosure and I called the bank and they suggested a deed in lieu and said that would end the estate liability. Is that so and what is a deed in lieu? Is it like a short sale? Thanks you.
Deed in lieu
A deed in lieu of foreclosure is not quite the same as a short sale. With a deed in lieu, the owner of the property, your mother's estate in this case, transfers the property to the lender. In return, the lender agrees to cancel the loan obligation and typically promises not to start, or continue, foreclosure proceedings. You should probably have an attorney help you with this transaction to insure that it does what you expect it to do. In a more typical case, the debtor's attorney would want to confirm that the bank agrees to waive collection of any deficiency balance. (If, when the bank sells the property, the amount they realize is less than the amount of the outstanding debt.) In your case, given that the estate apparently has no other assets, this should not be a sticking point. But other readers who are considering a deed in lieu for their residences should be aware that the process does not necessarily end their liability.