Do I Need a Lawyer for a Deed in Lieu?

Negotiated Contract

A deed in lieu of foreclosure arises out of a negotiated contract between you and your mortgage lender. You are always free to negotiate and agree to a deed in lieu situation without ever consulting or involving a lawyer. Neither state law, federal law nor mortgage lender policies require the involvement of a lawyer in the deed in lieu negotiations.

Benefits

A deed in lieu of foreclosure often makes sense to both the purchaser and the mortgage lender. From the borrower's perspective, a deed in lieu of foreclosure has a less severe impact on the borrower's credit rating. Additionally, the borrower can work out the terms of an agreement under which the lender will have no right to pursue the borrower for a deficiency. From a lender's perspective, a deed in lieu of foreclosure is often less expensive than formal foreclosure proceedings, and takes less time. Accordingly, neither the lender nor the borrower is generally anxious to spend extra money on lawyer fees. As long as the borrower is confident that the deed in lieu agreement will absolve the borrower of any further obligations under the mortgage loan, the borrower does not really need to involve a lawyer.

Peace of Mind

The prospect of a potential deficiency judgment lingering in the back of the borrower's mind after a deed in lieu of foreclosure can be stressful and unsettling. Involving a lawyer in the transaction will give the borrower the peace of mind to move on after the deed in lieu, fully confident that the mortgage loan is entirely behind him. Without a lawyer's involvement, a deed in lieu may not fully resolve the issue of a potential deficiency judgment, which could leave the borrower potentially liable for the mortgage even after signing the property deed to the lender.

Counseling

An experienced lawyer can also provide important counseling regarding legal options that may be available instead of a deed in lieu of foreclosure. Bankruptcy, mortgage modifications and other legal actions may allow the borrower to keep his home, whereas a deed in lieu results in the loss of a home. On the other hand, a U.S. Housing and Urban Development approved counselor may be able to provide the same type of foreclosure-avoidance counseling, without the expensive hourly rate that a lawyer will charge.