A deed in lieu of foreclosure aka (cash for keys) is when a home owner conveys all their interest in a property to the lender in order to avoid foreclosure proceedings. In the typical deed in lieu of foreclosure scenario, the mortgagee is in default i.e has not been making his or her mortgage payments.
Proceeding with the deed in lieu of foreclosure offers advantages to both the home owner and the lender.
The advantages to the borrower include the potential release from a large debt, less impact to your credit scores than a foreclosure, and also the avoidance of the public embarrassment of going through a foreclosure.
The lender would consider a deed in lieu because it saves them the time and expenses involved with a repossession. Most often when a bank agrees to do a deed in lieu of foreclosure the fair market value of the property is what the lender will be looking to receive.
In many cases the current value of your home is much less than the remaining mortgage balance.
In this scenario the bank may or may not agree to a deed in lieu. Most of the time a bank will not do a deed in lieu if there are 2nd mortgages, home equity loans, or tax liens against your property.
Another option besides a deed in lieu is what is known as a short sale. A short sale is a legal lender approved solution designed to assist those home owners who are financially strapped to get out from under their mortgage debt.
A short sale is negotiated through the mortgage holder of an owners home where by the mortgage holder agrees to take less than what home owner owes on the property. A short sale is the more common route to avoiding a foreclosure. In today's tough economic environment most lenders will now consider doing a short sale. 
Remember banks are not in the business of owning Real Estate. They would much rather do a short sale than be saddled with marketing, selling, and possibly fixing up a home in order to sell.
This is one of the biggest reasons why the short sale is the more common route to avoiding foreclosure than a deed in lieu.
If you have come under financial stress and are considering a short sale to avoid foreclosure, I would recommend reading the article I wrote Foreclosure avoiding it through a short sale or loan modification.
The article discusses in depth what a short sale and loan modification are and how they can help you get out from under your mortgage debt.
Some of the comments in this article are as good as the post itself as many of them are written by Real Estate experts on the topic.
If you live in the Metrowest Massachusetts area and are thinking about a short sale, I would be happy to discuss this situation with you confidentially.
If you live outside the Metrowest MA area please feel free to get in touch as well. I am connected to a large network of Realtors and would be happy to put you in touch with a Real Estate agent that has experience with short sales in your area.
See also Massachusetts Short Sales Real Estate Agent.
Notice of Foreclosure and Real Estate Lockbox & Foreclosure notice images are owned by Olivier Le Queinec at dreamstime.com and are copyrighted.
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The above information on Deed in lieu of foreclosure and short sales was provided by Bill Gassett, the team
leader for the #4 RE/MAX Team in Massachusetts in 2007. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 22+ Years. Bill's office is conveniently located in the center of Hopkinton MA at 77 Main Street.
I have a passion for Real Estate and love to share my marketing expertise!
Thinking of doing a short sale in the Metrowest Mass area see Metrowest Mass short sale Realtor. Want to have MLS access to beat other buyers to your dream home? Sign up with no obligation at my MLS Property Finder Site.
I service the following towns in Metrowest Massachusetts: Hopkinton, Milford, Upton, Southboro, Westboro, Ashland, Holliston, Mendon, Hopedale, Medway, Grafton, Northbridge, Uxbridge, Franklin, Douglas, and Framingham MA.
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