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lvonah · Joined: 30 Jun 2008 Posts: 2 1.77 Dollars($)

I own rental properties that I got behind on due to "not so good" tenants. I have the option to do a short sale with the lender or a deed-in-lieu? Can anyone tell me which would be better for me in regards to my credit, taxes etc. Thanks

jameshogg · Posted: Mon Jun 30, 2008 9:37 pm Post subject: RE: Deed in lieu vs short sale

Hi Ivonah,

Welcome to forums.

Short sale is a better option than deed-in-lieu as far as the credit effects are concerned. Know how short sale or dil can affect your credit .

To find out which is better tax-wise, you need to give me the name of your state so that I can give further suggestions.

Thanks

Niicss · Posted: Tue Jul 01, 2008 2:33 am Post subject: deed in lieu vs short sale

Welcome Ivonah,

Short sale will hurt your credit less than deed in lieu of foreclosure. Short sale only drops your credit score by 80 to 100 points and you can get approved for a mortgage in 18 months if you can improve your credit. By the way there are other options which can help you to avoid foreclosure. Take a look at 17 ways to protect yourself from the foreclosure trap.

Let me know if you have any further queries.

Guest

I live in Iowa. If I go with a short sale, how will it affect my tax liability. I am aware of the tax reform act whereas the difference owing will be forgiven, but I don't know if it apply's to rental properties. Thanks

Niicss · Posted: Tue Jul 01, 2008 6:22 am Post subject: Deed in lieu vs short sale

Welcome Lauren.

I felt you are the original poster. Did you somehow get logged out? If the debt is forgiven then you are not required to pay taxes on it as per the Mortgage Debt Forgiveness Act but in case of short sale the deference is not forgiven. So you will have to pay the deficiency judgment. Talk to your lender and get it clear whether or not you need to pay the deficiency judgment.

Let me know if you have any further queries.

cliff3 · Posted: Tue Jul 01, 2008 5:12 pm Post subject: Deed in lieu vs short sale

sorry the Mortgage Forgiveness Debt Relief Act of 2007 does not apply to rental properties. However, a short sale is the better option compared to deed in lieu because it does not have as big an affect on your credit score.

Hope this helps. Very Happy

Guest

Someone said that if I can prove "Insolvency" the difference between what is being paid to the bank vs. what is actually owed could be forgiven in regards to the tax hit. Does anyone know anything about that? Thanks

cliff3 · Posted: Tue Jul 01, 2008 10:15 pm Post subject:

I have not heard that but here is a link you can go to and read more about Mortgage Forgiveness Debt Relief Act of 2007.

http://www.irs.gov/irs/article/0,,id=179073,00.html

Guest

... can be found at 26 U.S.C. 108(a)(1)(B). Please consult with a REAL CPA to handle your taxes for the year in which you do the short sale/DIL in order to maximize your protection. I promise you-- H&R Block won't be able to help you properly!!! Smile

Guest

who pay taxes in the difference in the value of the house

adonis · Posted: Thu Jan 22, 2009 12:47 am Post subject:

Welcome gilbert,

In case of a short sale or foreclosure, the deficient amount resulting from the sale of the property is required to be paid to the lender. If that amount is forgiven, then the borrower will have to pay taxes on the forgiven amount.

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Deed in lieu vs short sale: Which is better for your credit?