Deed in Lieu

wilfredo_ocasio · Joined: 26 Oct 2009 Posts: 1 1.30 Dollars($)

If the bank agrees on a 'Deed on lieu' of foreclosure :

1. Since there is no sale, how does the bank come up with a defeciency dollar figure ?

2. Does the defeciency come up at the closing based on appraisal ? If so does that dollar figure come back to me as a 1099-C ?

3. Does the 'Note' get cancelled in a "Deed in lieu" or can the bank still come after me for the defeciency ?

jameshogg · Posted: Mon Oct 26, 2009 10:48 pm Post subject:

Hi wilfredo,

Once the lender sells off the property at the auction, you will come to know about the deficient amount resulting from the sale of the property. The deficient amount is the difference between the amount of mortgage owned by you and the sale price of the property. In case of a deed in lieu of foreclosure, the deficient amount is forgiven by the lender. The lender will not come after you for the deficient amount resulting from the sale of the property. Depending upon your state laws, you will not have to pay taxes for the forgiven amount.

Thanks

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