What is the difference between a Foreclosure and a Deed-in-lieu of Foreclosure?
A (typical) foreclosure refers either to a trustee’s sale foreclosure (non-judicial proceeding) or to a judicial foreclosure (a judicial proceeding). California is a “non-judicial” foreclosure state, so the Court need not be involved in foreclosure proceedings. A deed in lieu of foreclosure refers to a method of avoiding that formal foreclosure process and entering into an agreement with the lender to accept title to the property voluntarily. This usually saves everyone time and money in the long run. A deed in lieu of foreclosure is simply a conveyance of the property to the lender by grant deed or quitclaim deed; and, in exchange, the lender cancels the promissory note secured by the real property (including any potential personal deficiency). In this way the lender can avoid the foreclosure process to regain title to the property fast and efficiently, and all they are walking away from is a speculative (at best) claim against a likely insolvent borrower that will never be collectabl
