Posted: Tue Oct 09, 2007 12:38 am Post subject: Stuck with Bad Investment, planning to file a deed in lieu o
Hi, I am stuck with a house in Modesto, just got an evaluation done on it, the mortgage is around 280k but the value in that area just came to 190 or 200k if i sell which of course is not a good option, plus not working at the moment again so cannot keep making payments, plus house is getting broken into again and again as its lying vacant and not in the greatest condition, was thinking of doing a dil is that the best option, dont mind loosing points on fico score as not planning to take any more loans for a few yrs to come, whats the best option so can get out of it clean and owe nothing, what tax will i have to pay if i do a dil or a foreclosure
It's really bad to see to you totally get stuck with your problems. You are saying that the home is not in good condition and may be that's the reason you are not getting the full value of house. But what if you repair the house at your own cost and then look for the sale. Check it once whether it will profitable for you or not. Personally I did not prefer foreclosure, its affect my credit score. _________________ Procrastination is the enemy of your financial sucess
Posted: Tue Oct 09, 2007 5:08 am Post subject: RE: taxes after deed-in-lieu or foreclosure
Welcome Raj.
If you go for a deed-in-lieu, the lender will accept the ownership of the property and try to sell it off. If the sale proceeds are not enough to cover the unpaid debt, then the lender may do a charge-off, that is, he may cancel your unpaid amount of debt. This is reported to the IRS as a loss on the part of the lender and as income of the borrower. So, the borrower (you) will ahve to pay tax on the unapid debt.
To know more on this issue, please refer the section on Deed-in-lieu .
Are you running behind your mortgage payments? Then why do you want to sell your house?
I think you can repair your house first and then get an appraisal done. It will increase the value and then if you sell it, you might get a better price. It might help you to pay the maximum debt.
Jenkin i believe he said he isnt working now so hence there is no income
and as far as deed in lieu the bank has to accept that first. _________________ Eugene Volovik
Branch Manager
Team USA Mortgage
612-481-3127
Conventional, FHA and Commercial Lending
Hey Guys, Thanks a lot for your suggestions here. I can get the house fixed and hopefully get it rented but surely will not get to cover my mortgage plus the next ARM adjustment is around the corner the payments are going to triple which I will not be able to afford after a while.
I have not been late on my payments so far, this is the first month as I was thinking og doing DIL so not made my payment so far. I am debating
a) to fix it and get it rented again to cover some of the expense here
b) just to do a dil , really does not matter if the fico score goes down as i dont plan to take a loan for a few years now for sure
Do u think that is a good option considering that plus can the lender let go of the total unpaid debt or is that a sure short that I will have to pay the tax on that?? If thats the case, i guess the best is to get it fixed, raise the value and then do a dil if i cannot sell it..man the market is so bad...right now its horrible..
1. Eugene, thanks for correcting me, I overlooked that point.
2. Raj, even if your lender forgives the unpaid debt, you are liable to pay IRS tax on that. And if he files a deficiency judgement, you have to pay the unpaid amount.
raj
