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ScottyMacESQ
ScottyMacESQ, Lawyer
Category: Real Estate Law
Satisfied Customers: 16189
Experience:  Licensed General Practice Attorney, Texas
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I have a home that I am trying to return the deed to the bank

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I have a home that I am trying to return the deed to the bank (deed in-lieu). What if they decide I can afford the payments? What if I let the home go into foreclosure after they decide I can afford the payments? What if I file bankruptcy after they decide I can afford the payments and let it go into foreclosure?

ScottyMacESQ :

Thank you for using JustAnswer. I am researching your issue and will respond shortly.

ScottyMacESQ :

If they decided that you could afford and go to foreclosure, that still does not mean that they will be able to get a deficiency judgment. The main concern in a foreclosure is a "deficiency". This is where the property is sold for less than what is owed, at auction. In Washington,a deficiency judgment may be not obtained using the non-judicial foreclosure process (what most properties are sold at) when a property in foreclosure is sold at a public sale for less than the loan amount that the underlying mortgage or deed of trust secures. A deficiency judgment can be obtained in a judicial foreclosure sale, unless the property had been abandoned for the preceding six (6) months prior to the foreclosure judgment or decree that would preclude any deficiency.

ScottyMacESQ :

Most of the time the foreclosure is a trustee sale (since that is much cheaper and easier for the banks to do). In that situation you would not have a deficiency, and it could very well be "strategic". But it's impossible to say from the beginning what route the bank will take. It will likely take the trustee, nonjudicial route (meaning you're not on the hook for any deficiency), but it doesn't have to.

ScottyMacESQ :

Judicial foreclosures take a lot longer than non-judicial ones, and are more expensive. The only reason that they would likely take that route is if the deficiency was expected to be quite a bit. But if the deficiency was small, then they probably would go the non-judicial route, where they would not be able to seek a deficiency.

ScottyMacESQ :

Even if they get a deficiency, that could be discharged in bankruptcy, should it even come to that in the first place.

ScottyMacESQ :

Bankruptcy during the foreclosure process could take the underlying debt out of the equation, but they could still foreclose on the house, since that is the security interest for the loan. It would just mean that you could not be on the hook for any deficiency, etc... resulting from that sale (should they pursue the judicial route).

ScottyMacESQ :

Hope that clears things up a bit. If you have any other questions, please let me know. If not, and you have not yet, please rate my answer AND press the "submit" button, if applicable. Please note that I don't get any credit for my answer unless and until you rate it a 3, 4, 5 (good or better). Thank you, XXXXX XXXXX luck to you!

ScottyMacESQ :

Did you have any other questions before you rate this answer?

ScottyMacESQ :

Are you there? Please note that I am still here, awaiting your response or rating...

Customer:

So what you're saying Iis if the deed inlieu process decides I don't qualify could still let it go into foreclosure but would be liable for any deficit owed on the loan. How much lower than what is owed can they sell it for?

ScottyMacESQ :

No, what I'm saying is that if they don't do the deed in lieu and foreclose, they could choose two options there: (1) nonjudicial, where they take it right to sale but can't pursue a deficiency, or (2) judicial, where they have to get the judge's signature, but they could pursue deficiency. Number 2 is longer and more expensive, and rarely do they choose that option.

ScottyMacESQ :

As for selling it, it's public sale, so they sell it for what they can get.

ScottyMacESQ :

It's a public auction.

ScottyMacESQ :

Now they will typically set a reserve for the amount of the loan, in a non-judicial sale.

ScottyMacESQ :

Are you still there? It says that you've gone "offline"....

ScottyMacESQ :

Did you have any other questions before you rate this answer?

ScottyMacESQ :

Hello?

ScottyMacESQ :

Please note that I am still here, awaiting your response or rating..

ScottyMacESQ :

Should I continue to await your response, or may I assist the other customers that are waiting?

ScottyMacESQ :

My apologies, but I must assist the other customers that are waiting. If there's nothing else, please rate this answer. Please note that I don't get any credit for the time (~20 minutes) and effort that I spent on this answer unless and until you rate it a 3, 4, 5 (good or better) AND press the "submit" button, if applicable. If you feel that I have gone above and beyond in this answer (my average answer is about 10 minutes) bonuses are greatly appreciated. Thank you, XXXXX XXXXX luck to you!

Customer:

Thanks. My computer shut down do to an update. Again thanks I think I understand.

ScottyMacESQ :

My pleasure.If you have any other questions, please let me know. If not, and you have not yet, please rate my answer AND press the "submit" button, if applicable. Please note that I don't get any credit for my answer unless and until you rate it a 3, 4, 5 (good or better). Thank you, XXXXX XXXXX good luck to you!

ScottyMacESQ :

You're welcome, and again, good luck to you!

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