Deed in lieu of foreclosure vs. selling your house
Handing the house back to the lender avoids a foreclosure. Selling may leave you with money. Here's how to tell which fits.
No obligation. No pressure. Takes about 2 minutes.
The short answer
A deed in lieu of foreclosure means you voluntarily transfer ownership of your home to the lender to avoid foreclosure, so you don't have to sell it yourself. It can make sense when you owe more than the house is worth and can't keep it. If you have equity, selling is usually the better choice: a sale pays off the loan and you keep what's left, while a deed in lieu hands the whole house to the lender.
Step by step
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1
What it involves
You sign the house over to your mortgage servicer and move out. The lender has to agree, so ask your servicer whether it's an option for your loan.
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2
Make sure it settles the debt
The CFPB suggests confirming that the deed in lieu covers the full amount you owe and, in states where you could still owe a deficiency, getting a written waiver of it.
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3
Ask about moving help
Some lenders offer cash-for-keys relocation money when you leave the home. Ask before you sign.
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4
Check the tax side
Canceled debt is generally taxable, so talk to a tax professional before you agree.
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5
Put it next to a sale
If the house is worth more than you owe, a sale pays the loan and puts the difference in your pocket. A cash sale can close in as little as 7 days, which matters when a sale date is already set.
Sources: CFPB: What is a deed-in-lieu of foreclosure? ยท IRS Topic No. 431: Canceled debt
This page explains the general options. It isn't legal or tax advice. Talk to a HUD-approved housing counselor, an attorney or a tax professional before you agree to anything with your lender.
Cash offer vs listing
Example: a $250,000 home
| Offer | $205,000 |
|---|---|
| Repairs | $0 |
| Commissions | $0 |
| Closing costs | $0 |
| You walk away with | $205,000 |
| In 7 to 14 days | |
| Sale price | $250,000 |
|---|---|
| Repairs | about $8,000 |
| Commissions | about $13,800 |
| Closing and holding | about $6,000 |
| You walk away with | about $222,200 |
| In 60 to 90 days | |
Example only. Your numbers depend on your home and market.
If you have equity, we'll show you what a cash sale and a listing would each leave you, so you can weigh that against handing the house back.
Frequently asked questions
Does a deed in lieu clear my mortgage debt?
Only if the agreement says so. Confirm it covers the full amount owed, and ask for a written deficiency waiver where that applies.
Is a deed in lieu better than a foreclosure?
It avoids the foreclosure process, and the CFPB notes it may lessen the effect on buying a home later. A HUD-approved housing counselor can compare it with your other options.
When is selling the better move?
When you have equity. A sale pays off the loan and you keep the difference; with a deed in lieu, the house goes to the lender.
Who are you?
We are real estate investors based in Baltimore, helping homeowners since 2016. We buy houses directly for cash. We are not a licensed real estate brokerage and do not list homes ourselves; if listing could get you more, we show you the math so you can choose.