Deed in Lieu Agreement - Phase 7 - Conscious Agreements

When to Use This Template

A Deed in Lieu of Foreclosure is used when you choose to voluntarily transfer property ownership to the lender in exchange for full release from the mortgage debt. This avoids foreclosure proceedings and provides a controlled exit. Use this only when retaining the property is not viable and you want to negotiate favorable terms including cash for keys, credit reporting, and complete debt discharge.

Document Type

Property Transfer

Risk Level

Critical - Irreversible

Phase

7 - Settlement

Notarization

Required

CRITICAL WARNING

You are voluntarily transferring ownership of your property!
This is permanent and cannot be easily undone.
CONSULT AN ATTORNEY BEFORE SIGNING!

Template Document

This Deed in Lieu of Foreclosure Agreement ("Agreement") is entered into as of
[EFFECTIVE DATE] ("Effective Date")

BETWEEN:

BORROWER/GRANTOR:

[YOUR FULL LEGAL NAME]

[CO-BORROWER NAME, if applicable]

[CURRENT ADDRESS]

[CITY, STATE ZIP]

(collectively, "Borrower" or "Grantor")

LENDER/GRANTEE:

[BANK/SERVICER NAME]

[ADDRESS]

[CITY, STATE ZIP]

("Lender" or "Grantee")

PROPERTY DESCRIPTION

Street Address:
[PROPERTY STREET ADDRESS]
[CITY, STATE ZIP]

Legal Description:
[COMPLETE LEGAL DESCRIPTION FROM DEED - Lot, Block, Subdivision, etc.]

Tax Parcel Number: [APN/PARCEL NUMBER]

(hereinafter referred to as the "Property")

Recitals

WHEREAS, Borrower executed a promissory note dated [LOAN DATE] in the original principal amount of $[ORIGINAL LOAN AMOUNT] secured by a mortgage/deed of trust on the Property, with loan number [LOAN NUMBER] (the "Loan"); and

WHEREAS, Borrower is in default under the terms of the Loan, with a current claimed balance of $[CURRENT BALANCE], and Lender has the right to foreclose; and

WHEREAS, Borrower has requested that Lender accept a deed to the Property in lieu of foreclosure; and

WHEREAS, Lender has agreed to accept the deed in full satisfaction of the debt and to release Borrower from all obligations under the Loan; and

WHEREAS, Borrower acknowledges that questions have been raised regarding the validity of the original loan transaction, including potential lack of consideration, but agrees to this resolution to avoid litigation and obtain closure; and

WHEREAS, both parties desire to avoid the time, expense, and uncertainty of foreclosure proceedings;

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

TERMS AND CONDITIONS

1. CONVEYANCE OF PROPERTY

Borrower agrees to execute and deliver to Lender a [Warranty/Grant/Quitclaim] Deed conveying all of Borrower's right, title, and interest in the Property to Lender.

The deed shall be delivered on or before [DELIVERY DATE] ("Delivery Date").

2. FULL SATISFACTION OF DEBT

Upon receipt and recording of the deed, Lender agrees that:

The Loan shall be deemed PAID IN FULL
No deficiency judgment will be sought
Borrower is released from ALL personal liability
All obligations under the Note and Mortgage/Deed of Trust are discharged

This is a FULL SATISFACTION - no money is owed after deed delivery!

3. CONSIDERATION

The consideration for this Agreement includes:

☐ Cash payment from Lender to Borrower: $[AMOUNT]
☐ Moving/relocation assistance: $[AMOUNT]
☐ Forgiveness of debt exceeding property value
☐ Avoidance of foreclosure and its consequences
☐ Release from all liability
☐ Other: [SPECIFY]

4. PROPERTY CONDITION

Borrower represents that the Property is being conveyed in the following condition:

☐ Free of all personal property (broom clean)
☐ All keys, garage door openers, and access devices provided
☐ No intentional damage or waste
☐ All fixtures and improvements intact
☐ Utilities active through [DATE]

5. POSSESSION AND OCCUPANCY

☐ Borrower shall vacate the Property on or before [VACATE DATE]
☐ Borrower may remain as tenant until [DATE] at rent of $[RENT]/month
☐ Other arrangement: [SPECIFY]

6. TAX CONSEQUENCES

1099-C Cancellation of Debt:

☐ Lender WILL NOT issue a 1099-C (no cancelled debt reported)
☐ Lender WILL issue a 1099-C for cancelled debt of $[AMOUNT]

Note: Consult a tax advisor. You may qualify for insolvency or qualified principal residence exclusions.

7. CREDIT REPORTING

Lender agrees to report to credit bureaus as:

☐ "Deed in lieu of foreclosure"
☐ "Paid in full - account closed"
☐ "Settled - less than full balance"
☐ Delete tradeline entirely
☐ As agreed: [SPECIFY]

Reporting shall be completed within 30 days of deed recording.

CONDITIONS PRECEDENT

This Agreement is contingent upon:

Clear Title: Title search showing no liens superior to Lender's lien
No Other Encumbrances: No judgments, tax liens, or HOA liens exceeding $[AMOUNT]
Property Inspection: Satisfactory inspection by Lender
Insurance: Property insurance maintained until transfer
Voluntary Transfer: No duress or coercion
Corporate Approval: Lender's internal approval obtained

If conditions are not met by [DEADLINE DATE], this Agreement becomes void.

MUTUAL RELEASE

8. BORROWER'S RELEASE:
Upon recording of the deed, Borrower releases Lender from all claims related to the Loan, the Property, and the lending relationship, known or unknown.

9. LENDER'S RELEASE:
Upon recording of the deed, Lender releases Borrower from all obligations under the Loan, including any deficiency, and waives all rights to seek payment.

10. WAIVER OF UNKNOWN CLAIMS:
Both parties waive any claims that may be discovered in the future related to this transaction.

BENEFITS OF DEED IN LIEU

For Borrower:

Avoids foreclosure on credit report
No deficiency judgment risk
Possible cash for keys payment
Controlled move-out timeline
Complete debt discharge
Closure and fresh start

For Lender:

Avoids foreclosure costs
Faster property acquisition
Property in better condition
No redemption period
Reduced legal expenses

ADDITIONAL PROVISIONS

11. BANKRUPTCY

Borrower represents that:

☐ No bankruptcy has been filed in the last 120 days
☐ No bankruptcy is contemplated
☐ Will not file bankruptcy to delay transfer

12. WARRANTIES

Borrower warrants:

Full authority to transfer the Property
No undisclosed liens or encumbrances
No undisclosed leases or tenancies
No environmental contamination known
Compliance with all laws and regulations

13. INDEMNIFICATION

Borrower agrees to indemnify Lender for:

Any false representations
Undisclosed liens or claims
Environmental issues not disclosed
Claims by tenants or occupants

14. CONFIDENTIALITY

☐ This Agreement and its terms are CONFIDENTIAL
☐ This Agreement may be disclosed freely

If confidential, permitted disclosures include: attorneys, accountants, tax advisors, and as required by law.

15. COSTS AND FEES

☐ Each party bears their own costs
☐ Lender pays all transfer costs and recording fees
☐ Costs split as follows: [SPECIFY]

IMPORTANT INFORMATION

Right to Cancel: Some states provide a right to cancel within a certain period. Check your state law.

Tax Advice: The IRS may consider forgiven debt as income. Consult a tax professional about:

Mortgage Forgiveness Debt Relief Act
Insolvency exception
Qualified principal residence exception
Form 982 filing requirements

Legal Counsel: You have the right to consult an attorney before signing. This is a significant legal transaction.

SIGNATURES

By signing below, the parties acknowledge they have read, understood, and agree to all terms of this Agreement.

BORROWER/GRANTOR:

Name: [PRINT NAME]

Date: [DATE]

Co-Borrower (if any): [PRINT NAME]

Date: [DATE]

LENDER/GRANTEE:

[BANK/SERVICER NAME]

By: ________________________________

Name: [AUTHORIZED SIGNATORY NAME]

Title: [TITLE]

Date: [DATE]

NOTARY ACKNOWLEDGMENTS

BORROWER/GRANTOR ACKNOWLEDGMENT:

State of [STATE]
County of [COUNTY]

On [DATE], before me, [NOTARY NAME], Notary Public, personally appeared [BORROWER NAME(S)], who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies).

_______________________________
Notary Public
My Commission Expires: _____________

LENDER/GRANTEE ACKNOWLEDGMENT:

State of [STATE]
County of [COUNTY]

On [DATE], before me, [NOTARY NAME], Notary Public, personally appeared [SIGNATORY NAME], who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity for the entity identified therein.

_______________________________
Notary Public
My Commission Expires: _____________

Filing Checklist

Before Signing - Final Checklist

Have you consulted an attorney?
Do you understand you're giving up ownership?
Is the debt fully discharged?
Are move-out terms acceptable?
Have you considered tax consequences?
Is credit reporting specified?
Do you have alternative housing arranged?
Are all personal belongings removed/planned?
Do you have copies of everything?
Have both parties signed and notarized?

Important Reminder

A Deed in Lieu transfers your property permanently. Once recorded, this cannot easily be undone. Make sure you have exhausted other options (loan modification, short sale, negotiated settlement keeping property) before proceeding. Ensure you receive adequate consideration (cash for keys, relocation assistance, favorable credit reporting) in exchange for your voluntary transfer.