We all know what a deed-in-lieu is. The question is: How often does a DIL occur? In 80 short sales, I have zero DILs, as far as I know. I would like to know other people's experiences. I have a DIL in process where for the first time the client is keeping me involved, and I may be discovering why they do not occur. The complication/work/process would deter most of my clients. What are your stories with deed-in-lieu?
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It is very expensive for the banks to do a deed-in-lieu, and can take a long time to complete if it even gets considered.
Good luck
@Kathleen That's the way is should work, I think. The Servicer/Investor should prefer to short sell the house, unless they think that the offer is not fair-market-value.
@KerryAnn This is the situation with my DIL-candidate properties. The Investor has an unrealistic view of market value, and everyone gives up. The only way to make this behavior understandable, to me, is that the Investor thinks they are being scammed, so they want to mitigate the fraud-risk and acquire the property.
@Walt I'm in the same position with a property where the Investor is rejecting $75,000, the property is totally trashed, I am sending them pictures tonight. "Do you really want to reject this $75K offer?"
DIL is easy. Bank sends the deed and the seller's sign it. Seller has 30 days or so to get out and sometimes the lender will offer cash for keys. The DIL is more economical for the lender than the foreclosure - very little attorney's fees. I've had one. Home has been on the market for 2+ years as an REO and over 4 in total. Bank is stuck on a price that the market will not bear and home being abandoned is now suffering from disrepair. Too bad. Wish they would have worked with the offer that was written 3 years ago.
I have 2 clients whose got the message from their loan servicer's that DIL was an option after 120 on the market and no sale.
However, when short sale deals fell through, the servicers were not so interested in the DIL option. Both of these properties went back on the market and are under contract a 2nd time.
Maybe the seller needed to apply for the DIL, which they didn't do. Since there is no commission paid to an agent, I have not done any work on a DIL option.
It's actually been pretty painless so far. Once Fannie Mae decided to go this route, we were contacted quickly by Chase, got the paperwork within days, and are currently working on City of Chicago foolishness with the water bill.
We landed here because we had some offers in the 20,000 - 30,000 range but Fannie thinks its worth 70,000. It isn't. It's trashed.
If I was an agent I'd hand a DIL off to an attorney, because that's the pro who should be handling it. And why work for free?
I stay out of it other than to give them the number to call. After all they are no longer selling. The bank usually needs the homeowner to call to initiate. What I have been told by the 2 that pursued it was no worse than the short sale paperwork and they had already gathered it. By the time they had gotten to the DIL point they were used to it. 1 couldn't do it b/c the 2nd still wanted cash for DIL that the 1st wouldn'tt pay. The other the seller stopped it mid review as a buyer came forward and we closed a short sale. 1 property which was in poor condition the bank actually said they didn't want it- they wouldn't do a DIL. Fortunately we sold it!
@Sam. Yes, totally agree. I think the Servicer/Bank/Investor just doesn't want the "mark" in the " # of Foreclosures" column.
@Sam My comment on "burden to owner" was a practical one. Meaning, by the time my clients get to the DIL stage, their commitment to avoid the foreclosure is greatly reduced. So, too much burden, and they just say "forget it. If they want to foreclose, let 'em. If they come after us, we'll declare BK."
The Investors seem to overvalue the "waiving of their right to pursue" after a DIL.
I hear you...I guess it depends on the sellers and deficiency laws in a state. If you have a foreclsoure that is deficiency demanded, and you have sellers that would be in great risk with a judgment against them, then they don't have the option of throwing the towel in.
Ultimately, I'm not sure why the banks even do DIL as they still have to take ownership of the property and sell it as an REO. For the bank, not sure what the real difference between DIL and foreclosure is? The actual court costs avoided are not that large.
@Sam. Investor/Insurer opinion of value above FMV is my main cause of failure of the short sale. For me, most of these "failures" just sit vacant, no foreclosure, no DIL. In a couple of cases, the owners moved out-of-state.
Your experience matches mine. I've discovered that the DIL process is a substantial burden on the owners. And, by the time they get to this stage, they have pretty much given up on the house. And, as you say, no one is paying for the work.
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