Rodkin on Getting a Mortgage After a Deed in Lieu of Foreclosure

Readers ask questions, and our real estate expert answers. This week, a reader named Sharon asks about her chances of getting a future mortgage after a deed in lieu of foreclosure.

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3 years ago
Posted by Chris House

While I agree with Dennis' assessment of the extraordinarily long market time for the subject property, this topic needs some further explanation. When advising clients who are struggling with their payment and considering their options, I help them to work with their lender to consider all of the options, including loan modification, deed-in-lieu (DIL), and short sale.

DIL can have benefits like reducing the impact to your credit (depending on how the lender reports it to the credit bureaus) and offering an opportunity to negotiate away the deficiency. However, don't be surprised if a lender doesn't jump at the opportunity to take the property back. Many lenders are struggling with the sheer size of their REO inventory and are not eager to rush into having another one to add to the mix. It is often a more viable strategy to list the property with a real estate broker as a short sale at a price based on true market value and try to bring the lender a fair offer that will allow them to avoid the high cost associated with taking a property through the full foreclosure process (where at the end they will simply get the property back and have let a year or so go by with no income stream from the mortgage).

It is also very important to speak with a qualified real estate attorney that has experience working with homeowners in foreclosure. There are important legal ramifications to consider including, but not limited to, the lender's right to pursue a deficiency.

Chris House
Broker Associate
The Hudson Company

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