What is the main disadvantage to a lender who chooses to accept deed in lieu of foreclosure?

The primary disadvantage to the borrower is the loss of the property, the income from the property, and the borrower's investment in the property. The conveyance of the property is also taxable.

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Arizona Deed in Lieu of Forfeiture (Agreement)

Arizona Deed in Lieu of Forfeiture (Agreement)

Name: Arizona Deed in Lieu of Forfeiture (Agreement)
Brand: US Legal Forms
Price: 59.00 USD
Rating: 4.85 (336 reviews)

Category:

Arizona Real Estate - Contract for Deed

State:

Arizona

Control #:

AZ-027LRS

Format:

Instant download

Description

Provides the Purchaser notice of rights concerning forfeiture process.

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FAQ

The impact that a deed in lieu has on your score depends primarily on your credit history.According to FICO, if you start with a score of around 780, a deed in lieu (without a deficiency balance) shaves 105 to 125 points off your score; but if you start with a score of 680, you'll lose 50 to 70 points.

Because of the risk of judicial scrutiny, insurability issues can also arise in a situation when the lender accepts a deed in lieu of foreclosure but does not release borrowers from responsibility for the underlying obligations under the promissory note.

The primary disadvantage to the borrower is the loss of the property, the income from the property, and the borrower's investment in the property. The conveyance of the property is also taxable.

Both short sales and deeds in lieu can help homeowners avoid foreclosure.One benefit to these options is that that you won't have a foreclosure on your credit history. But your credit score will still take a major hit. A short sale or deed in lieu is almost as bad as a foreclosure when it comes to credit scores.

A deed in lieu of foreclosure is different from a short sale because it transfers the property to the lender instead of selling it to a new buyer.Most lenders find this option less appealing than a short sale because they will need to handle the logistics of the sale instead of the homeowner.

Less damage to your credit: A deed in lieu agreement stays on your credit report for 4 years while a foreclosure sticks around for 7 years. Taking a deed in lieu agreement can allow you to buy a new home sooner than if you were to go through a foreclosure.

The waiting period on a conventional loan after a deed in lieu is 4 years, compared to 7 years on a conventional loan.

If your lender agrees to a short sale or to accept a deed in lieu of foreclosure, you might owe federal income tax on any forgiven deficiency. The IRS learns of the deficiency when the lender sends it a Form 1099-C, which reports the forgiven debt as income to you.

Arizona Deed in Lieu of Forfeiture (Agreement)

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FAQ

How will a deed in lieu affect me?

What is the risk to a lender who accepts a deed in lieu of foreclosure?

What is the main disadvantage to a lender who chooses to accept deed in lieu of foreclosure?

Is a deed in lieu of foreclosure a good option?

Is it better to short sale or deed in lieu?

How long does a deed in lieu affect your credit?

How long do you have to wait to get a mortgage after a deed in lieu?

Will I owe money after a deed in lieu of foreclosure?

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