Saturday, February 4, 2023
Chuck Marunde, J.D., Broker/Owner 360-775-5424


iRealty Virtual Brokers


Broker/Consultant

Washington State

SUBSCRIBE
  • Home
  • Search MLS
    • Sequim MLS
    • Sequim MLS Map Search
    • Port Angeles MLS
    • Port Townsend MLS
    • San Juan Islands MLS
    • All Islands MLS
    • How to Search the Sequim MLS
  • Videos
    • Sequim Videos Q&A
    • Buyer Videos Part 1
    • Buyer Videos Part 2
    • Buyer Videos Part 3
    • Buyer Videos Part 4
    • Living in Sequim Video Channel
  • Books
    The Coming Real Estate Crash

    The Coming Real Estate Crash

    The Sequim Real Estate Trilogy

    The Sequim Real Estate Trilogy

    Sequim Real Estate Videos for Buyers: The Ultimate Video Guide for Sequim Washington

    Sequim Real Estate Videos for Buyers: The Ultimate Video Guide for Sequim Washington

    Escaping California to the San Juan Islands

    Escaping California to the San Juan Islands

    Get Healthy

    Get Healthy: Increase Natural Immunities, Cellular Energy, Deep Sleep & Decrease Blood Pressure

    Manage Your Energy

    Manage Your Energy Not Your Time

    Real Estate Brokerage From Bricks and Mortar to High Tech Virtuality

    Real Estate Brokerage From Bricks and Mortar to High Tech Virtuality

    7 Myths of Selling Your Home

    7 Myths of Selling Your Home

    Buying Your Retirement Home

    Buying Your Retirement Home

    The New World of Marketing for Real Estate Agents

    The New World of Marketing for Real Estate Agents

    Sequim Real Estate For Buyers: Free eBook Updates Forever

    Sequim Real Estate For Buyers: Free eBook Updates Forever

    24 Secrets of Buying a Country Home

    24 Secrets of Buying a Country Home

    Sequim Real Estate: A Buyer’s Guide

    Sequim Real Estate: A Buyer’s Guide

    Living Off The Grid iin Alaska

    Living Off The Grid in Alaska

    Buying and Selling Real Estate

    Buying and Selling Real Estate

    Trending Tags

      • Sequim Real Estate for Buyers (Free eBook Updates Forever)
      • Sequim Real Estate: A Buyer’s Guide (Paperback)
      • Escaping California to The San Juan Islands
      • Buying & Selling Real Estate in The Rain Shadow
      • Real Estate From Bricks & Mortar to High Tech Virtuality
      • The Seven Myths of Selling Your Home
      • Buying Your Retirement Home
      • The New World of Marketing for Real Estate Agents
    • Agents
      Marunde Google

      Chuck Marunde on Google

      Flat Fee Listing Broker

      Flat Fee Listing Broker

      Buyers Agent Chuck Marunde

      Buyer’s Agent Chuck Marunde

      Trending Tags

        • Buyers Agent Chuck Marunde
        • Flat Fee Listing Broker
        • Google Profile & Leave Reviews
      Tetralogy
      No Result
      View All Result
      • Login
      • Register
      • Home
      • Search MLS
        • Sequim MLS
        • Sequim MLS Map Search
        • Port Angeles MLS
        • Port Townsend MLS
        • San Juan Islands MLS
        • All Islands MLS
        • How to Search the Sequim MLS
      • Videos
        • Sequim Videos Q&A
        • Buyer Videos Part 1
        • Buyer Videos Part 2
        • Buyer Videos Part 3
        • Buyer Videos Part 4
        • Living in Sequim Video Channel
      • Books
        The Coming Real Estate Crash

        The Coming Real Estate Crash

        The Sequim Real Estate Trilogy

        The Sequim Real Estate Trilogy

        Sequim Real Estate Videos for Buyers: The Ultimate Video Guide for Sequim Washington

        Sequim Real Estate Videos for Buyers: The Ultimate Video Guide for Sequim Washington

        Escaping California to the San Juan Islands

        Escaping California to the San Juan Islands

        Get Healthy

        Get Healthy: Increase Natural Immunities, Cellular Energy, Deep Sleep & Decrease Blood Pressure

        Manage Your Energy

        Manage Your Energy Not Your Time

        Real Estate Brokerage From Bricks and Mortar to High Tech Virtuality

        Real Estate Brokerage From Bricks and Mortar to High Tech Virtuality

        7 Myths of Selling Your Home

        7 Myths of Selling Your Home

        Buying Your Retirement Home

        Buying Your Retirement Home

        The New World of Marketing for Real Estate Agents

        The New World of Marketing for Real Estate Agents

        Sequim Real Estate For Buyers: Free eBook Updates Forever

        Sequim Real Estate For Buyers: Free eBook Updates Forever

        24 Secrets of Buying a Country Home

        24 Secrets of Buying a Country Home

        Sequim Real Estate: A Buyer’s Guide

        Sequim Real Estate: A Buyer’s Guide

        Living Off The Grid iin Alaska

        Living Off The Grid in Alaska

        Buying and Selling Real Estate

        Buying and Selling Real Estate

        Trending Tags

          • Sequim Real Estate for Buyers (Free eBook Updates Forever)
          • Sequim Real Estate: A Buyer’s Guide (Paperback)
          • Escaping California to The San Juan Islands
          • Buying & Selling Real Estate in The Rain Shadow
          • Real Estate From Bricks & Mortar to High Tech Virtuality
          • The Seven Myths of Selling Your Home
          • Buying Your Retirement Home
          • The New World of Marketing for Real Estate Agents
        • Agents
          Marunde Google

          Chuck Marunde on Google

          Flat Fee Listing Broker

          Flat Fee Listing Broker

          Buyers Agent Chuck Marunde

          Buyer’s Agent Chuck Marunde

          Trending Tags

            • Buyers Agent Chuck Marunde
            • Flat Fee Listing Broker
            • Google Profile & Leave Reviews
          No Result
          View All Result
          iRealty Virtual Brokers
          No Result
          View All Result
          Home Foreclosures

          Deed in Lieu of Foreclosure – Will My Bank Take One?

          by
          July 27, 2012
          Reading Time: 4 mins read
          0 0
          4

          Is a Deed in Lieu of Foreclosure a good idea?   With our home in foreclosure or about to go into foreclosure, should we offer our bank a Deed in Lieu of Foreclosure?   We also owe a second mortgage.   This is a question that I get asked a lot lately, more than in all the years before.

          The Deed in Lieu of foreclosure has several almost insurmountable obstacles.   The explanation is a bit involved and much more complex than this simple explanation, but here are some highlights.

          Deed in Lieu of Foreclosure

          The Deed in Lieu is rarely accepted by a bank.   There are a number of complex legal and insurance issues for banks if they take a Deed in Lieu.   If a bank forecloses and they suffer a loss, they complete an application for loss with their mortgage insurance carrier, which is often HUD or some other insurer.   Banks almost never suffer a financial loss, because they get reimbursed for any loss as the result of a foreclosure.     (This is not true if the bank is local and keeps the loan in its local portfolio, but that is very rare.   Almost all bank loans are sold.)   But as I learned when I worked for Metropolitan Mortgage & Securities Company many years ago, if a bank accepts a Deed in Lieu, the same application and rules for reimbursement no longer apply, and it is much harder to prove that the bank would have sustained the same or greater loss if they had actually completed a foreclosure.   So rather than go down that risky path, banks most often choose to foreclose, and that way they know they ultimately will get all their money.   Nowhere in their calculations is there any consideration for you as the homeowner.   They make their decisions based exclusively on their income and expense sheet.

          If a bank in first position agreed to accept a Deed in Lieu, the property would still be subject to the second mortgage, and the bank in first would owe the entire balance to the second bank.   That’s another reason the bank in first will prefer to foreclose.   By foreclosing on the first mortgage, the second mortgage is wiped off the title.

          Deed in Lieu of Foreclosure and Taxes

          There is another very difficult and unanswered question for you as a homeowner.   Even if the bank agreed to take a Deed in Lieu, the IRS has regulations which could hit you with a tax based on the forgiven balance of the loan.   I don’t know the precise math, but it has been argued that the IRS could consider the forgiven balance of the mortgage income in that same year, and the taxes could be horrendous.   There was discussion in this past year about the possibility of the politicians passing temporary laws that would toll those IRS regs and give people relief, but I haven’t found anyone who knows for sure how any of this has worked out in the real world.   Even accountants seem confused on these issues as to what should or could happen.

          One last difficult issue is if the bank in first accepts a Deed in Lieu, they could still come after you for the loss in a civil suit, unless they agreed to sign a contract with you that they would not.   But why would a bank who holds all the cards ever agree to not come after you for any loss they sustain.   Remember, if they accept the Deed in Lieu, they suddenly owe the entire balance of the second.   The second only goes away as security on the real estate if the first forecloses and the second mortgage decides not to protect their interest by paying off the first.

          By the way, if the first bank accepts a Deed in Lieu, there is no foreclosure and therefore no Trustee’s Sale.   The bank in first would literally own the property as though they were stepping into your shoes, so they would have to list it for sale, but they still owe the second, so it is a losing situation for them.

          Deed in Lieu of Foreclosure Difficult

          The practical course of action will be that the bank in first forecloses on the property.   They will feel they have no choice when their legal department and their loss and mitigation department flush out all the issues, just like I did here.   When they understand all this, they will simply move forward with the foreclosure.   The unanswered question is whether the bank in second will try to protect it’s interest by either making the payments on the first, which they could do, or pay off the first entirely and then foreclose themselves.   It is extremely rare that a bank in second protects its interest in this way.   They usually get foreclosed on and go lick their wounds, possibly threatening to sue you for their loss.

          Banks are reticent to accept a Deed in Lieu of Foreclosure but some are.

          Last Updated on July 27, 2012 by Chuck Marunde

          Tags: deed in lieu of foreclosure
          ShareTweet

          Related Posts

          Foreclosures

          Buying a Foreclosure and How Banks Kill Deals

          September 7, 2019
          2
          Foreclosures

          Foreclosure Ripoffs

          September 7, 2019
          2
          Foreclosures

          HUD Closing Requirements

          September 8, 2019
          3
          Lawsuits against Auction.com
          Foreclosures

          Lawsuits Against Auction.com

          October 14, 2014
          59
          Dangers of Buying a Fannie Mae Foreclosure Through Homepath
          Foreclosures

          Dangers of Buying a Fannie Mae Foreclosure Through Homepath

          June 12, 2014
          490
          Foreclosures

          Sequim Foreclosures and Homes Underwater

          September 21, 2019
          0
          Next Post

          Port Angeles Homes and Land: Lifestyle

          Sequim Bed and Breakfast and Port Angeles Bed and Breakfast

          Comments 4

          1. Real Estate Investing Secrets says:
            12 years ago

            Thanks for this post. It’s indeed enlightening for those who are confused on the matter of foreclosures.

            Reply
          2. Daniel McClain says:
            12 years ago

            I agree, It is usually not worth trying.

            Reply
          3. Website says:
            12 years ago

            Thank you. You answered my question with this article. It looks like Sequim is the place to retire. That’s what my husband and I are thinking. Just have to sell our home here first.

            Reply
          4. Pulley says:
            10 years ago

            Your article answered my question about trying to get the bank to take a deed instead of foreclosing. Thank you very much.

            Reply

          Leave a Reply Cancel reply

          Your email address will not be published. Required fields are marked *

          I agree to the Terms & Conditions and Privacy Policy.

          This site uses Akismet to reduce spam. Learn how your comment data is processed.

          "I wish I read this before selling my
          home. I could have saved $50,000." Andy 

          Search 2,200 Articles by Category

          • Trending
          • Comments
          • Latest
          Buyer and Seller

          What if a Buyer and Seller Talk to Each Other?

          August 5, 2022
          Prorate Propane

          How to Prorate Propane at Closing

          August 15, 2015
          Terminate a real estate contract

          How to Terminate a Real Estate Contract

          December 31, 2020

          The Sequim Blue Hole – A Map of Rainfall

          September 1, 2019
          print newspapers

          Print Newspapers Losing Readers to the Internet

          42
          Buyer and Seller

          What if a Buyer and Seller Talk to Each Other?

          32
          FNMA Killing Transactions by Requiring Private Road Maintenance Agreements

          FNMA Killing Transactions by Requiring Private Road Maintenance Agreements

          31

          What Documents Does a Buyer Need to Buy Real Estate?

          24
          Sequim real estate market

          Sequim Real Estate Market: Annual Review for 2022

          February 2, 2023
          Seattle Real Estate Market in Decline

          Seattle Real Estate Market in Dramatic Decline

          December 22, 2022
          Buying a home

          Buyers Must Be More Cautious Than Ever

          December 7, 2022
          Flat Fee Listing Service

          Sellers Chase the Market Down Once Again

          December 10, 2022

          Subscribe to Chuck 
          Marunde's Newsletter

          Popular Stories

          • Buyer and Seller

            What if a Buyer and Seller Talk to Each Other?

            0 shares
            Share 0 Tweet 0
          • How to Prorate Propane at Closing

            0 shares
            Share 0 Tweet 0
          • How to Terminate a Real Estate Contract

            0 shares
            Share 0 Tweet 0
          • The Sequim Blue Hole – A Map of Rainfall

            0 shares
            Share 0 Tweet 0
          • Why is Sequim One Of The 10 Best Places To Retire?

            0 shares
            Share 0 Tweet 0

          Leaving Comments   I hope you’ll join our community and leave comments from time to time. Please realize that comments, if approved, will be public, so do not use any personal information you don’t want broadcast to the world, and definitely don’t leave a phone number. Comments are not the place to ask Chuck Marunde for help in finding a home. To do that, call or text Chuck.

          Neither Chuck Marunde nor iRealty Virtual Brokers offers legal advice on this site. Please Read Our Legal Disclaimer

          If you’d like to view how we protect your privacy, see our Privacy Policy.

          iRealty Virtual Brokers

          iRealty Virtual Brokers reaches out to buyers around the United States with thousands of online articles, MLS sites, apps, real estate books, videos, and much more specifically to help buyers find all the answers to their questions. We also now offer a flat fee commission listing service that saves sellers tens of thousands of dollars.

          iRealty Virtual Brokers
          125 Olympic Ranch Ln
          Sequim, Washington 98382
          360-775-5424

          Search the entire NWMLS in Washington State:

          Sequim-Homes.com

          The largest independent real estate blog in the State of Washington with over 2,200 articles totally focused on our client’s best interest, their needs and their curiosity. All free and 100% reliable. I’m here if you need me, 

          © 2006-2022 iRealty Virtual Brokers and Chuck Marunde

          No Result
          View All Result
          • Home
          • Search MLS
            • Sequim MLS
            • Sequim MLS Map Search
            • Port Angeles MLS
            • Port Townsend MLS
            • San Juan Islands MLS
            • All Islands MLS
            • How to Search the Sequim MLS
          • Videos
            • Sequim Videos Q&A
            • Buyer Videos Part 1
            • Buyer Videos Part 2
            • Buyer Videos Part 3
            • Buyer Videos Part 4
            • Living in Sequim Video Channel
          • Books
            • Sequim Real Estate for Buyers (Free eBook Updates Forever)
            • Sequim Real Estate: A Buyer’s Guide (Paperback)
            • Escaping California to The San Juan Islands
            • Buying & Selling Real Estate in The Rain Shadow
            • Real Estate From Bricks & Mortar to High Tech Virtuality
            • The Seven Myths of Selling Your Home
            • Buying Your Retirement Home
            • The New World of Marketing for Real Estate Agents
          • Agents
            • Buyers Agent Chuck Marunde
            • Flat Fee Listing Broker
            • Google Profile & Leave Reviews
          • Login
          • Sign Up

          © 2006-2022 iRealty Virtual Brokers and Chuck Marunde

          Welcome Back!

          Login to your account below

          Forgotten Password? Sign Up

          Create New Account!

          Fill the forms bellow to register

          *By registering into our website, you agree to the Terms & Conditions and Privacy Policy.
          All fields are required. Log In

          Retrieve your password

          Please enter your username or email address to reset your password.

          Log In
          This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.