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?
I've had one where the Homeowner did a DIL against my advice.... Small Local Credit Union. I was not involved in that process and didn't care to be.
I am involved for the first time in one now, we have a property that is void of any decent comps and the BPO's keep comming back way out of line, prop is not far from forclosure so we have been helping the buyers try to get deed in lieu approved as plan b. It is with SunTrust on a Freddie deal, definately as intensive or more so then short sale process, not fun and you don't get paid. If it keeps the prop out of forclsoure its worth it though, that is our goal and so far we have always been able to do it via short sale, but it makes me feel better in this case that there is a plan b for the sellers.
A DIL is a Voluntary Foreclosure.
@Kevin. Can you share more info? Was the debt waived in the DIL agreement? Why would the CU want the property, if you could sell it at FMV? Why did the owner not want to sell, if this was an option? I assume there were no other encumbrances?
I have no idea what was involved with the DIL and do not know why the CU wanted the property back, but they did. The owner's had the property listed with me, but decided the didn't want to bother with the Short Sale process anymore. I believe we are going the see more Servicer's pushing DIL's
Agreed. I hear from some when they call servicer about a short sale- they are referred to doing a DIL. We end up closing a short sale anyway.
@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.
Not to sound cold, but I am not too concerned about the deed in lieu process being a burden on the owners. It really is no different then their burden on a short sale, and the results are actually very similar where foreclosure is averted. In my case, the sellers are facing foreclosure with deficiency demanded, which means they get a judgment against them in foreclosure. Ultimately, the sellers, while in an unfortunate situation, need to take some responsibility to help in getting them out of the predicament.
My sellers actually did start to push back regarding the amount of documentation required, which I quickly pointed out that I was receiving nothing, was only doing this to help them, and that if they did not want to help me help them then they are on their own. They quickly apologized and have been cooperative since.
From my end, certainly a burdon, and an uncompsated one at that...I guess I do get some karma!
@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. Yes, totally agree. I think the Servicer/Bank/Investor just doesn't want the "mark" in the " # of Foreclosures" column.
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!