Myth #9

Myth #9: Processing a deed-in-lieu of foreclosure is such a simple process that there is no need to involve an attorney and pay their high fees.

Reality: While the deed-in-lieu process is exceedingly simple (the consumer simply signs the one-page document produced/presented by the lender, gets it notarized and sends it back) the process has MAJOR, POSSIBLY DISASTROUS consequences for the borrower. Therefore, it is never a good idea for a consumer to relinquish a property via deed-in-lieu without adequate legal and insurance counsel. Real estate professionals should have nothing to do with this simple, disaster-prone activity.

Reasons:

1. Any number of things could happen between the time the borrower MAILS notification of a title transfer to the lender/servicer and the time when that transfer is, in fact, recorded. The Ohio Attorney General’s Office has shared with me that the office has received numerous complaints of the lender’s failure to do so for MANY months. In the meantime the borrower remains responsible for any damages, costs, injuries, etc associated with the property.
2. Lender/servicer may claim to never have received the MAILED deed-in-lieu if the problem which has arisen is a particularly expensive one.
3. Acceptance of the title to the home does not absolve the consumer of the financial obligation for the full indebtedness; i.e. possible deficiency judgment.
4. Additionally, there is always the possibility of a tax liability associated with eventual transfer to a new purchaser if the home sells for less than full pay-off plus costs.

The risks are substantial: Hiring a competent attorney is the only smart thing to do. REALTORS, you are advised to keep your nose out of this.

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