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Has anyone ever opted for a deed in lieu of foreclosure?

Not sure what category to put this under.....but anyways.....Our house has been up for short sale for a few months now and we are looking into deed in lieu of foreclosure. We are very leery about what we will have to pay once it is finalized. I know the mortgage company will issue a 1099 for us to pay taxes on it but the mortgage company said we qualify to be exempt from paying any taxes. Has anyone chose this route and if so, what advice can you give?

 
Anonymous

Asked by Anonymous at 2:06 PM on Jun. 23, 2011 in Money & Work

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Answers (3)
  • What you need is a deed in lieu of foreclosure WITHOUT recourse- that means that they can't go after you for the difference. This is a lot better for your credit than a foreclosure- and it's usually worth it for the bank to take it- foreclosures cost banks a lot of money and there are a lot more legal hoops that they have to jump through.

    Some banks might ask you to pay some of the difference. ie) if you owe $200,000, but your home is only worth $150,000- a bank might ask you to pay say $5000 or $10000 to get out. If you have a lot of assets chances are the deed will not go through- but it sounds like you don't- so yeah, it will probably work.

    And you won't have to pay taxes on the difference on a personal residence. State taxes, maybe, but Federal, no.

    It will give your credit a hit- but not as much as a foreclosure. And right now- you probably have bigger things to worry about than that.
    Good luck! You'll be fine!
    Erica_Smerica

    Answer by Erica_Smerica at 2:17 PM on Jun. 23, 2011

  • Frankly we are taking foreclosure and filing for bankruptcy... I can't eve pretend to be able to pay anything...
    Anonymous

    Answer by Anonymous at 2:25 PM on Jun. 23, 2011

  • Our credit is already bad so that's not even an issue. We just want to be done with the house and start building our credit back up and moving on. Thanks very much for the advice!!!!
    Anonymous

    Comment by Anonymous (original poster) at 2:39 PM on Jun. 23, 2011

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