Right answer, wrong reason

Kristine’s warning regarding realtors is not to be taken lightly, and not to defend the realtor but in a strange way the realtor was correct if only he had stated differently than what he’s reported to have said.

Properties taken back via deed-in-lieu become the lenders REO and REO are sold with marketable title (no encumbrances). It’s not like a foreclosure where legally all junior liens are wiped off (but not out), but the lenders requirement that unpaid taxes (and other priority liens) and junior liens to be removed by the borrower before lender’s acceptance of a deed-in-lieu. Most troubled borrowers have other liens and/or unpaid taxes against their property and either are unwilling, financially unable, or lack the savvy to remove the liens on the cheap. Lenders aren’t willing to pay those liens when a foreclosure accomplishes it much more effectively, cheaper, and perhaps faster depending upon a state's method of foreclosure. A homeowner can most probably clear junior liens for pennies on the dollar, whereas lenders likely would have to settle the liens for considerably more because they’re perceived to have deeper pockets. Hence the reason you rarely see deeds-in-lieu accepted by lenders.

So in a sense the realtor is sort of right despite his misunderstanding of the process. On a multi-choice or true/false question the realtor may guess correctly depending upon the wording, but on an essay test he would most likely earn little if any credit.