Deed in lieu

[Thomas Watson]

If I own a 1st position note on a house that is vacant and the borrower is on board to do a deed in lieu, do I have to still do a foreclosure to get rid of  any junior liens? Does it ever make sense to do both a deed in lieu and foreclose on the property?

[Steve Babiak]

NO, NO, NO - do not get DIL if there are junior liens. Unless you want to pay off (possibly in full) those junior liens. Once you accept the DIL, the junior lien now becomes THE SENIOR lien, and you just gave them good reason to proceed with foreclosure! They no longer have a senior position lien getting paid in full before they get paid. 

The only time to take DIL is when there are no other liens, or that other liens are tiny enough that you don't have a problem paying them in full. 

Calling in others to offer advice here:

@Bill Gulley @Dion DePaoli