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Rentals Don’t Pay |
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Dear Edith: We own three rental houses.Currently, two are not rented and we are having trouble meeting the mortgage payments.We have spoken to a couple of real estate agents and they are not optimistic about being able to sell for a price that will completely pay off the mortgages.I have read about "title or deed in lieu of foreclosure".Can you tell me what is involved?Is this something we can do with just the mortgage lender or do we need to contact a real estate attorney?Is this just as bad on our credit as letting the lender foreclose on the properties? |
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Under some circumstances a lender will agree to simply take the property and cancel the debt.That’s a deed in lieu of foreclosure and it’d be great if you, or your lawyer, could talk them into it.
Under some circumstances lenders will agree to a different arrangement, settling for whatever you can get if you sell the place yourselves (a short sale).The IRS, though, regards the forgiven portion of the debt as taxable income to you--money you once received and never paid back.But at least you avoid foreclosure, which can sometimes leave you burdened with a deficiency judgment if the public sale doesn't yield enough to cover the debt.
Either solution will probably show up on your credit record, but won't do nearly as much damage as foreclosure would.Your big hurdle will be persuading the lending institution to agree to any of this. It's up to them.Contact the mortgage company, or have a lawyer do it for you, and discuss your situation with someone in their "workout" department.They may have other helpful suggestions. |
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Edith
Originally published on January 6, 2006 |
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