When a homeowner is “upside-down” or owes more than their property is worth and they don’t want to or can’t find a way to continue owning the property, they and the bank have three options:
- Short sale. Bank approves a sale for less than what is owed.
- Foreclosure. Bank goes through the courts and takes the home away.
- Deed-in-lieu. Owner gives the property back to the bank in a simpler transaction.
For the past few years, short sales and foreclosures have been the banks’ solutions of choice. Now many large banks are gearing up to take the deed-in-lieu route.
Deeds-in-lieu can sometimes be a better solution for troubled homeowners and the banks. They can be less expensive for the banks and less stressful for the homeowner. Bank of America is even offering cash payments of $3,000+ to some homeowners to as an enticement to take this route.
How does this affect the market? Expect less short sales on the market and probably more bank-owned properties again. Also I’m hoping this means that the banks are ready to move their inventory, which would result in fewer abandoned-looking, scrappy-yarded homes in our neighborhoods. That would surely be a benefit to neighborhood values.
