Upcoming Foreclosures

Quitclaim deed or short sale a house?

My mother in law ows $90k on a house that she probably can only sell for $50k. She was talking about doing a quitclaim deed with the lender, and I am not familiar with this. Where is the difference btw quitclaim deed and a foreclosure? What is the best thing to do? She lives in Michigan.

Public Comments

1. Either way she will owe the bank the difference and the IRS WILL!! tax her on the bank loss. YOU CAN'T JUST WALK AWAY
2. Sorry to hear about that, a lot of folks are in her position in this market. A foreclosure is when someone becomes so delinquent that the mortgage loan holder orders a sherriffs sale in which people and/or the bank will bid on the home...your mothers credit will be damaged and she likely wont be able to get another loan for at least 3 years. With a quit-claim deed, the bank will take ownership of the home and your mother will be relieved of title. HOWEVER, this doesn't necessarily hold her harmless from the loan...make sure the lender is taking over the loan as well.
3. It would not be a Quitclaim Deed but a Deed in Lieu that she would sign. The Deed in Lieu means it is in lieu of foreclosure. That just means she turns the property back over to the bank rather than the bank foreclosing. A short sale would mean that she has a buyer willing to purchase the property for less than she owes on it and the bank would have to accept that offer (a harrowing process!). Currently, the IRS has issued a moratorium on capital gains taxes for the difference between what is owed and what is paid off. See: http://www.govtrack.us/congress/bill.xpd?bill=h110-3648 If the bank forecloses, it seizes the property and offers it for public auction. If it doesn't sell, the bank would own it. At some point during that process, she would be evicted if she has not already moved out. For legal and tax repercussions, you need to contact an attorney or a tax professional. Hope this helps.