[The Professor]

The primary difference is that with a deed-in-lieu there is no court supervision of the process, you are simply conveying the property to the lender. But if for example there was a second loan on the property, the lender would take ownership with that second loan still attached and the lender would have to face paying it off.

On the other hand, with the court supervised "consent foreclosure," junior liens such as the second loan can be extinguished (however the junior lien holders would have to be made parties to the lawsuit and there would have to be a judicial finding that there is no equity in excess of the first loan's balance in order to extinguish the junior liens).

The "consent foreclosure" provides a degree of safety that the deed-in-lieu doesn't.

Take care,

Daniel