So I’m not sure who coined the phrase “friendly foreclosure” but it certainly seems to have caught on.
If you do a google search on Friendly Foreclosure you get over 2.5 million results.
I help people short sell homes in the Phoenix area. I guess that makes me a “Short Sale Realtor®”. When I am counseling homeowners, our discussion always touches upon on options and alternatives to short sale. One of these options is called Deed in Lieu of Foreclosure or in “mortgage slang”, a Friendly Foreclosure.
Incidentally, look at the Google results for Deed in Lieu of Foreclosure.
Whether it’s our penchant for slang, or that lieu is hard to spell, the term “friendly foreclosure” has sure caught on.
So what happens in a friendly foreclosure, aka deed in lieu of foreclosure?
In a deed in lieu of foreclosure, the homeowner voluntarily deeds the collateral property back to the lender in an exchange for a release from all obligations under the mortgage.
Sounds great right? I know. Several years ago someone I knew attempted to do a deed in lieu. She signed a paper deeding her home back to Chase and mailed it, along with the keys, instead of the mortgage payment.
It took a few weeks before she got a friendly letter back explaining that Chase was not at liberty to accept the deed. They suggested she try a short sale first.
So that’s generally how it works. Your lender may agree to a Deed in Lieu of Foreclosure but generally they make you attempt to sell the property first at fair market value through a licensed real estate agent for at least 90 days.
In the Phoenix Market, the number of homes for sale are at historically low levels.
This means it is very likely that homeowners will be able to successfully short sell their home and never have to walk down the Friendly Foreclosure road.
If you have questions on short sales, the foreclosure process or just want to know your home value, drop me a line.
Aimee Burrell | Real Estate Broker | Tipton Group Real Estate