Deed-in-lieu of foreclosure
A deed-in-lieu of foreclosure is one of the options to the borrower before a Sheriff's Sale takes place. The borrower agrees to sign the deed to the property back to the bank so that the bank does not have to go through the more lengthy process of foreclosure. Not all banks will agree to a deed-in-lieu, and there are certain conditions that must be met depending on the bank involved. First and foremost, there cannot be any second liens on the property or other clouds on the property title.
Many banks will require that the borrower try to sell the property before they will agree to a deed-in-lieu of foreclosure. Although the timeframes may vary, many banks will require that the property be listed by a realtor through a listing agreement and the property must be listed for at least 60 days for fair market value. If the property does not sell after the 60 days, the bank would then assess whether a deed-in-lieu would be a viable option for the borrower.
A deed-in-lieu of foreclosure might make sense if the borrower did not need the advantage of the Michigan redemption period, which is typically 6 months or longer. A borrower planning to move out of state might be a good candidate for a deed-in-lieu of foreclosure.