Legal Question in Real Estate Law in California

Re: Deed in Lieu of foreclosure

A deed in lieu of foreclosure can be a comfortable exit strategy for a borrower who can no longer cope with the loan payments but would prefer to avoid the cost and hassle and possible exposure to deficiency judgments that a foreclosure (or even bannkruptcy) would entail. Pros and cons are that you, the defaulting borrower, are negotiating from a position of relative weakness, so you have to be attentive to the details to be sure you aren't agreeing to a bad deal.

Some topics to negotiate might be, if you have any bargaining power at all: (1) get an agreement that they will not seek a deficiency judgment; in other words, that your deed satisfies your obligation completely; (2) talk about what will be reported to the credit bureaus; (3) get an acceptable move-out date (and plan to stick to it); (4) if there are any possible issues about the maintenance and condition of the property, the payment of past-due property taxes, possible allegations of loan fraud, or the like, put them on the table and get them included in the settlement to avoid any post-deed problems for you. You should be able to walk away after the deal closes and records without facing the possibility of further claims and suits.