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Foreclosure / Deed in Lieu laws in Missouri What will the process be like???

My husband & I have to sell our first house (we already own our new home) . We have been trying to sell this house since the first of the year, we have tried a short sale, rent to own, even just rent, to get out from under two mortgage payments. However, after two years of trying my husband & I just found out we are expecting! Now, we have to let this other house go back to the bank, as there is no other options. All the realestate agents in my area are telling me that sales are down 32 percent from this time last year. I have contacted my lender & told them of my situation, theyre sending me a short sale package, as well as a deed in lieu package. My question is, is there any reason the bank wouldn't accept a deed in lieu? I have no other liens on the property & it is very comparable to the neighborhood. If not, will they have to abide by MO foreclosure laws since that is where the house is lcoated? MO laws - no defficiency judgements are prohibbited (I won't owe the difference)

Public Comments

1. Keep in mind that a short sale and a deed in lieu are two totally different approaches to avoiding foreclosure. I will do my best to explain both sides in some depth. With a deed in lieu, whether in a state that allows deficiency or not, a lender WILL NOT pursue deficiency. That is the upside to a deed in lieu. However, you will have a "voluntary foreclosure" on your credit report. This can keep you from purchasing a new home for at least two years in most cases. It will effect your credit negatively but they will NOT pursue deficiency regardless of the state. With a short sale the lender is accepting, from an end buyer, less than what you owe. They can pursue deficiency in states where deficiency judgement is allowed. Now not all lenders will pursue a deficiency and it is very possible to have the lender sign a deficiency waiver if the short sale is submitted correctly. It is still ultimately up to the lender. Now I have done some research and also worked with some clients in MO and it is my understanding that deficiency IS ALLOWED. Please research this and make sure you have all information on your state laws before making a final decision. However, you will not receive a credit beating because this is actually a sale of your property and therefore a settlement of your debt. Now on the back side of this the lender can issue a 1099 "Forgiveness of Debt" for the difference. For example, if you have a buyer for $150k and you owe $175k and the lender approves this short sale than they can issue a 1099 for the amount of $25k. There are particular ways of reporting this and it is possible you will only owe tax on the part of the $25k or owe no tax at all. However, it is highly recommended you seek the advice of an accountant and explain to him the reasoning for the 1099 and that it is coming from a property. Now the other snafu you may run into here is that part of the $25k could be picked up as proceeds on sale of your "personal residence" and you would then be exempt if there were a gain caused by the sales price and the portion being picked up from the 1099 (if any). You will however, need to pass the personal residency test. Considering that I don't know all the particulars surrounding your circumstance that is the most general description I can give you. Remember to seek the help of a CPA when filing your taxes if you receive a 1099 "Forgiveness of Debt" from your lender.