Generally, the phrase ‘deed in lieu of foreclosure’ explains the process more so than any actual deed itself.
As the phrase implies, if the person who purchased property cannot afford to make the mortgage payments to the lender or seller, the mortgage holder may agree to accept ownership of the property ‘in lieu of’ proceeding with a foreclosure lawsuit through the court system.
An agreement between the parties is required before the transfer of the property is made in lieu or instead of the legal foreclosure process.
The parties can also agree to an arrangement whereby all or a certain portion or percentage of the amount owed by the person transferring the property is forgiven in exchange for the transfer of the property.
These agreements are generally in writing, but do not need to be.
Once the agreement is reached, the person transferring the property does so via a quitclaim or warranty deed. For an affordable way to create said Deeds, see Standard Legal’s Quitclaim Deed legal forms software.