Deed of Lieu....advice, help?

Three years ago my family bought a house and two months ago we received a notice saying we had to pay the full balance of 175,000. My parents were buying this house owner to owner. We were confused and soon found out that it was a balloon payment that was in the contact, we were just unaware about it because neither our Realtor nor his rep. told us about this.. (i know we should have hired an attorney) We are unable to remortgage our house so we decided to deal with the foreclosure and move out to a small house that already belongs to us. The owner told us that he can do the deed of lieu or the foreclosure. My dad choose foreclosure because in order to do the deed of lieu the owner wanted us to replace our custom fans and sliding door that we took. My dad refused so he said he filed a police report for robbery. We did not change our mind.. But no he said that he is willing to do the deed of lieu with no additional fee. What would be the best option for us? Is there something that we should be on the look out if we do sign the deed of lieu. It seems a bit suspicious for him to freely agree to this. Please no mean or rude comments. Thank you in advance.