Many real estate investors have not considered using a deed in lieu of foreclosure as a moneymaking strategy. But those who do have found that helping homeowners give a deed to their mortgage company in lieu of foreclosure will not only stop the auction, but actually pay them for their time and expertise.

A deed in lieu of foreclosure is one of several ways for a homeowner to work out an arrangement with their lender to resolve things without having to go through with a foreclosure auction. A borrower who is behind on mortgage payments gives the property willingly to their lender prior to the auction. They transfer ownership by signing a deed, in lieu of (or as an alternative to) foreclosure.

Other methods of saving one's home are not always available to homeowners in distress. They may be unable to sell their house, to qualify for a forbearance agreement, mortgage modification, or to refinance their home. This is why knowing how to manage the process of a deed in lieu of foreclosure can make an investor thousands more per year than they otherwise would.

Here's how a deed in lieu of foreclosure can help everybody win:

• The investor finds a motivated seller and attempts to buy the house or do a short sale. If this is not feasible, or the lender will not approve a short sale, the next step is to attempt a deed in lieu of foreclosure. In exchange for making sure that the homeowner signs the paperwork and vacates the property in "broom-clean condition," many mortgage companies are willing to send a check for anywhere from $1000 – $3500.

• The homeowner benefits because a deed in lieu of foreclosure keeps them from having an ugly foreclosure on their credit report, and allows them to take care of the situation and have resolution. A "deed in lieu" may surpass a foreclosure in saving the borrower money by reducing the lender's total costs and therefore reducing the amount of any deficiency judgments later.

• And, most lenders favor a deed in lieu of foreclosure over an auction in order to avoid paying more legal and marketing fees, which can be substantial. It also assures them that the property will be in satisfactory condition, which makes their job of reselling it easier and faster.

Clearly, a deed in lieu of foreclosure is an excellent technique that can help investors to make money from a deal they otherwise couldn't. The best strategy when working with a seller in pre-foreclosure is to attempt to buy the house through normal methods, of course, for a larger profit. But if these methods aren't going to work, knowing how to profit from a deed in lieu of foreclosure can be the difference between making an extra $1000 - $3500 instead of nothing at all.