- QUESTION: Can you please explain what a deed in lieu of foreclosure is and how it works?ANSWER: In a deed in lieu of foreclosure, you surrender your home to the lender to avoid the hassle of the lender filing a foreclosure action against you. Essentially, you’re making a pre-emptive strike and going out on your own terms rather than being forced out. Psychologically and emotionally, that’s important for a lot of people.In order for your lender to accept a deed-in-lieu, your title to the property must be clean, meaning you have no other liens or judgments against you. Further, most lenders are hesitant to accept many deeds-in-lieu for fear of opening the floodgates to other homeowners wanting to hand back their properties. Banks like short sales better because the homeowners are doing all the work of finding the buyers. Your lender probably will not even consider a deed-in-lieu unless you have already tried a loan modification or a short sale.
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