Key takeaways
- You voluntarily transfer the home to the lender in exchange for release from the loan.
- Lenders usually require that you try to sell first and that there are no other liens.
- Get a written release of any remaining balance, and ask about relocation assistance.
- If you have equity, selling is usually better. A deed in lieu gives that equity to the lender.
What is a deed in lieu of foreclosure?
With a deed in lieu (“in place of”) of foreclosure, you sign the property over to your lender, and the lender agrees to cancel the loan. It avoids a public auction and usually lets you agree on a move-out date.
When lenders usually agree
- The home has been listed or marketed for a period without selling.
- There are no second mortgages, judgments or other liens, or those lienholders agree to release them.
- You can document a genuine hardship.
- The home is in reasonable condition and will be left vacant and clean.
Pros and cons
| Potential advantages | Drawbacks |
|---|---|
| Avoids a public foreclosure sale | Any equity goes to the lender, not you |
| A planned move-out date | Not available if other liens can’t be cleared |
| Some programs offer relocation assistance | Still a serious negative on your credit |
| Can include a full release of the debt | Forgiven debt may be taxable |
Insist on a written release
The agreement should state clearly that the transfer satisfies the debt in full and that the lender won’t pursue any deficiency. Have a Georgia attorney review it before you sign.
If you have equity, sell instead
A deed in lieu hands the whole property to the lender. If your home is worth more than you owe, selling it yourself, even quickly and as-is to a cash buyer, lets you keep the difference. If you owe more than it’s worth, compare a deed in lieu with a short sale.
This guide is general information for Georgia homeowners, not legal, tax or financial advice. Laws and lender practices change, and every situation is different. Talk with a HUD-approved housing counselor (800-569-4287) or a Georgia attorney about your circumstances.