Deed in Lieu vs Short sale
So I am in the process of purchasing a multi-family home at a big discount from a seller that I am close to that is in foreclosure. I am trying to lean one way or another between doing a deed in lieu for six months and then refinance or approach the bank to attempt a short sale.
This individual is ready to give up on this property (6 payments unpaid (~15k to make even; current balance 173k, mortgage is ~$1400, taxes 7k, rehab costs ~75k).
Deed in Lieu: I'm not the most familiar with this process but the concept is we pay the 15k balance, they sign a deed over to us then we refinance in 6 months after doing some of the most important parts of the rehab (i.e. roof, heating and electrical). Then we can start renting the 3bedroom @1600-1800/mo.
Or
Short sale: Approach the bank as less than what its currently owned. I fear this due to the average time it takes to complete a short sale as well as the fact that this area can bring back a potential appraisal that implies the plot itself is worth $200-250k.
Have any of you encountered this type of decision point when assessing a similar deal? Any insight, suggestions or feedback are greatly appreciated!
Most Popular Reply
@Xavier Torres That's not how a deed in lieu works. A deed in lieu is short for a deed in lieu of foreclosure. It's a process whereby a homeowner can basically surrender the deed back to the lender and avoid a foreclosure. However, it's not a process where the homeowner can transfer the deed/ownership to someone else (like you) and then that person owns the home.