From the Detroit News:
Alan and Alyson Wirgau live in a cute ranch on a quiet suburban street next to an award-winning school. There’s a new roof above their heads, a new deck in back and a For Sale By Owner sign in front.
Instead of weighing offers, the family is weighing an option that seemed unthinkable a year ago: If they don’t sell their home soon, they may turn down the heat, load their possessions in a U-Haul and drive away.
With a job in Indianapolis and dim prospects for selling their home, the Wirgaus are considering handing the keys back to the bank and walking away from their home.
They are among a growing number of Michigan families asking lenders to take their homes off their hands. That trend, paralleling a rapid rise in foreclosures, illustrates the desperation some families feel as home values fall below their mortgage debt.
That process, called a deed in lieu of foreclosure, is an agreement to give up all ownership rights in a home or piece of property to the lender.
It’s not a good option for anyone, but it’s often better than the alternative. Homeowners’ credit ratings are hurt, but not as much as in a foreclosure; the lenders lose money on homes now worth less than the outstanding loan, but lose less than the cost of a foreclosure proceeding.
There is no state or national data on deeds in lieu of foreclosure because it is an internal agreement between lenders and homeowners.
Two years ago the Wirgau family’s 1,500-square-foot home was valued at $210,000. Today, it’s for sale at $180,000 — just enough to pay the mortgage and the closing costs.
No one has made an offer in the three months it’s been on the market. At the full asking price, “we’d just break even, and I’d bend down and kiss their (the buyers’) feet,” Alyson Wirgau said.