Latest / Real Estate Note Investing / Episode 46: Deed in Lieu of Foreclosure

Transcript

Episode 46: Deed in Lieu of Foreclosure · Real Estate Note Investing

• 0:00
  SPEAKER_00: Welcome to the show, where you'll learn how to invest in mortgage notes, the savvy real estate investor's secret weapon to create cash flow without tenants and property acquisitions for pennies on the dollar.
• 0:12
  SPEAKER_00: My name is Robert Haitha, founder of Fix Notes, and my mission is to make note investing ethical, profitable, and accessible for you.
• 0:20
  SPEAKER_00: In every episode, we're democratizing the industry to put these powerful Wall Street assets into the hands of mainstream investors like you.
• 0:29
  SPEAKER_00: So without further ado, let's get into this show where you're in good hands with my AI clone.
• 0:34
  SPEAKER_00: Let's go.
• 0:37
  SPEAKER_00: This program is for informational purposes only and should be independently verified before taking action.
• 0:43
  SPEAKER_00: A deed in lieu of foreclosure is exactly what it sounds like.
• 0:47
  SPEAKER_00: The borrower signs the deed to the property directly over to you as the lender, bypassing the foreclosure process entirely.
• 0:53
  SPEAKER_00: For a borrower who has decided they no longer want the property and no longer want the debt, it is a clean way out.
• 0:58
  SPEAKER_00: For you as the node investor, it is a way to take control of real estate collateral without spending the time in legal fees that a formal foreclosure requires.
• 1:07
  SPEAKER_00: But there are important things to verify before you accept a deed in lieu, and skipping those steps can create problems that are harder to unwind than the foreclosure you are trying to avoid.
• 1:16
  SPEAKER_00: The first consideration is title.
• 1:18
  SPEAKER_00: Before you accept any deed, you need to know exactly what you are taking title to.
• 1:22
  SPEAKER_00: A title report run at this stage will surface any liens, judgments, or other encumbrances that are attached to the property.
• 1:29
  SPEAKER_00: If there are outstanding code violations, mechanics liens, judgment liens, or other encumbrances you did not anticipate, those become your problem the moment you record the deed.
• 1:39
  SPEAKER_00: You need to understand that picture fully before you sign anything.
• 1:42
  SPEAKER_00: The second consideration is property condition.
• 1:45
  SPEAKER_00: A borrower who is handing back a property they no longer want may not have been maintaining it.
• 1:49
  SPEAKER_00: In the best cases, the property is in reasonable shape and your main work is getting it listed and sold.
• 1:54
  SPEAKER_00: In the worst cases, the property has been stripped of fixtures, damaged, or left to deteriorate over a long period of vacancy.
• 1:59
  SPEAKER_00: Getting a boots on the ground inspection, or at minimum, a recent drive-by valuation before accepting the deed helps you understand what you are actually acquiring.
• 2:08
  SPEAKER_00: The value of the collateral at acquisition is not always the value of the collateral after a difficult borrower has been in it.
• 2:14
  SPEAKER_00: The third consideration is whether a short sale might be the better path.
• 2:17
  SPEAKER_00: If there is a market for the property and the borrower is cooperative enough to work with a realtor, a short sale often produces a faster and cleaner exit.
• 2:26
  SPEAKER_00: You avoid recording a deed in your name, you avoid paying transfer taxes, when you eventually sell, and the property goes directly to a new buyer through a normal sales process.
• 2:36
  SPEAKER_00: The deed in lieu makes more sense when the borrower is uncooperative enough to make a listing impossible, when the timeline favors speed over maximizing proceeds, or when you have a specific use plan for the asset that justifies taking it back directly.
• 2:49
  SPEAKER_00: One creative application of the deed in lieu worth knowing about is using it as leverage in a payment plan.
• 2:56
  SPEAKER_00: In some jurisdictions, a borrower can preemptively sign a deed in lieu document that only gets recorded if they default on the agreed payment terms.
• 3:03
  SPEAKER_00: Essentially, the borrower is putting real skin in the game, the deed, as collateral for their promise to pay.
• 3:09
  SPEAKER_00: This is not enforceable in every state and should always be reviewed by a local attorney before you implement it.
• 3:14
  SPEAKER_00: But where it works, it is a powerful way to reinforce a borrower's commitment to following through on a modification or payment plan because the consequences of default become immediate and concrete.
• 3:26
  SPEAKER_00: When you do decide to move forward with a deed in lieu, the closing process involves the borrower executing a deed that transfers title to you, signing a release of the debt, and in most cases receiving some form of consideration in exchange.
• 3:39
  SPEAKER_00: Even a nominal amount.
• 3:40
  SPEAKER_00: To make the agreement legally sound, your attorney handles the recording of the deed in the county public records.
• 3:45
  SPEAKER_00: From that point, you own the property and the management of that asset becomes your responsibility.
• 3:52
  SPEAKER_00: One final point.
• 3:53
  SPEAKER_00: Always think ahead to your exit before you take back a deed.
• 3:56
  SPEAKER_00: Reaching out to local real estate investors before you close the deed in lieu can give you a ready buyer waiting in the wings.
• 4:02
  SPEAKER_00: If you can find a sophisticated investor who understands the situation and is willing to acquire the deed directly from the borrower, you sidestep the transfer entirely.
• 4:10
  SPEAKER_00: The deal goes from a non-performing note to a new property owner without ever sitting on your books.
• 4:14
  SPEAKER_00: That is a clean exit by any measure.
• 4:16
  SPEAKER_00: Next time, we are going to cover the foreclosure process, what it actually involves, how timelines vary by state, and when it becomes the necessary path forward.
• 4:26
  SPEAKER_00: Thanks for sticking around to the end, and thank you to my trusty Robot and the Fix Notes team for putting together another episode.
• 4:33
  SPEAKER_00: If you want to learn more and hang out with the real not AI version of me, join our free school community at school.com slash fixed notes.
• 4:43
  SPEAKER_00: That's s k-o-l.com slash f I X N O T E S.
• 4:48
  SPEAKER_00: In the meantime, we'll see you in the next episode.