Legal Question in Real Estate Law in Utah

Re: deed inlieu

Hello,

A "deed in lieu" is a deed in lieu [instead] of a foreclosure.

This is the scenario: A property is being foreclosed on by a lender. Rather than have the lender go through the entire foreclosure process, a borrower offers to deed the property back to the lender "in lieu" of having the lender go through the foreclosure process.

Lenders will sometimes accept a deed in lieu of foreclosure but usually will not. That is because if a property is in foreclosure, the borrower is usually in greater financial difficulty than just this loan and there may well be liens against the property because of the debtor's financial difficulties. Those liens will still be "attached" to the property if the lender accepts a "deed in lieu" of foreclosure (thereby reducing the value of the property to a prospective foreclosure sale purchaser), whereas if the lender goes through the foreclosure process those liens on the property will also be foreclosed on and therefore it is usually in the lender's interest to not accept a deed in lieu of foreclosure (it frequently is also in the borrower's best interest to allow the foreclosure process to proceed and not offer a deed in lieu of foreclosure).