What is the difference between a Judicial Foreclosure / Deed of Trust Sale and a Deed in Lieu of Foreclosure?
A. A Judicial Foreclosure / Deed of Trust Sale is an involuntary sale of real estate by the lender due to a breach of the terms of the note by the borrower(s). In most states, if the forced sale does not yield enough proceeds to fully pay the outstanding mortgage balance, the Lender will be granted a deficiency judgment which can be collected from the borrower(s). Under a “deed in lieu of foreclosure”, the borrower(s) and lender reach an agreement whereby the Borrower(s) voluntarily surrenders the property to the Lender to avoid the expense and credit damage incurred during the foreclosure process. If negotiated properly, the Lender will forgo any and all rights to a deficiency judgment.
