A deed in lieu of foreclosure—often referred to as a deed in lieu—is a deed by which a borrower (mortgagor) transfers fee simple title to a lender (mortgagee) to satisfy a mortgage debt.

A deed in lieu of foreclosure is a substitute for the foreclosure process and a delinquent debtor or mortgagor may avoid paying a deficiency balance (if the home is worth less than the amount owed) and may lessen the impact on their credit report by signing a deed in lieu.

In Arizona, a deed in lieu of foreclosure is a legal instrument where a homeowner voluntarily transfers ownership of their property to the lender to satisfy the outstanding mortgage debt and avoid the foreclosure process. This option can be beneficial for both parties; the borrower may avoid the negative consequences of a foreclosure on their credit history and potentially be relieved from the obligation to pay any deficiency balance if the property's value is less than the mortgage debt, depending on the agreement with the lender. Arizona law typically requires that both parties enter into the agreement voluntarily and that the lender accepts the deed in lieu of foreclosure. It's important for borrowers to understand that lenders are not obligated to accept a deed in lieu and may proceed with foreclosure if it is in their financial interest. Additionally, borrowers should be aware that there may be tax implications for debt forgiveness, and they should consult with an attorney to fully understand their rights and any potential liabilities.