Good morning,

I'm sorry to hear of your dilemma.

First of all, a true foreclosure can take a long time---often 6 to 18 months, and in the meantime your tenants can continue to reside there and pay the rent.

On May 20, 2009, new legislation went to effect--- "Protecting Tenants at Foreclosure Act of 2009." This legislation provides that leases survive a foreclosure -- meaning that the tenant can stay at least until the end of the lease, and that month-to-month tenants are entitled to 90 days' notice before having to move out. Only properties which are bought at auction, or at post auction sale, by an owner who plans to use the property as their Primary Residence may force the lessee out of the property, and they STILL must give the lessee a 90 day advanced written notice of the termination of the lease.

Here is a link to the Act: http://www.nlihc.org/doc/701-704-Public-Law-111-22.pdf

There really is not a whole lot of benefit to a short sale UNLESS, you can get an agreement IN WRITING from the lender that they will not seek a deficiency judgment from you after the short sale, and that they will forgive the debt.

Other than that, the short sale generally is very time consuming---lenders often will not agree to the offer made by the prospective buyer, even after you bring what you believe is a good offer---if there is more than one mortgage--all lenders must agree on the short sale---you must generally remain current on your mortgage during this period---your credit score will suffer almost as bad a hit for the short sale as it would for a foreclosure. Finally, recently it was determined that the average short sale in the US sold for about 10% below market value---meaning that if your outstanding loan is much higher than about 10% over market value, you may encounter difficulty getting a short sale approved by your lender.

Most people will instead opt for what is known as a strategic foreclosure. They cease making payments on the mortgage and taxes---and bank the money they save during the 6 to 12 month average time it takes the lender to decide to begin foreclosure and when the property is sold at the foreclosure auction for use in relocating.

After the foreclosure is completed, the lender will auction the house. The lender can do one of a couple of things then.

The lender can seek a court judgment against you for the difference between the loan amount and the amount of sale at auction (deficiency). With the judgment, they can attempt to collect money from you; they can garnish your wages or levy on your bank account.

The lender, however, often will not bother to do this though because the collection rate on deficiency judgments are usually not very good --in fact statistically, the collection rates are dismal.

The lender may instead choose, and often does choose, to write the debt off for tax purposes. If they do that, they will send you a 1099 tax form and the loss the lender took (the difference between the loan amount and the amount of sale at auction).

If the property foreclosed on, or which you short sold, was your primary residence, and the 1099 you receive is for the tax years 2007 through 2012, then you will not have to report the amount on the 1099 form as income for tax purposes.

If the property foreclosed on, or short sold, was not your primary residence, you may have to pay taxes on the amount written off. HOWEVER, if you can show that you were insolvent at the time of the foreclosure---that your debts, including the house, exceeded your assets, then the IRS will not force you to pay any taxes on the amount that the lender writes off.

If you were not fully insolvent at the time of the foreclosure---as an example you had $10,000 more in assets than in debts, then while the lender may 1099 you for $100,000, you would only have to pay taxes on the amount that you were above the insolvent level----you would pay income taxes on just $10,000.00.

Consider allowing the foreclosure process to go forward, and allow the management company to continue collecting the rent and taking care of the property until your contract with them is up---and don;t renew it. Then deal with the tenant yourself and continue collecting the rent until the foreclosure sale is had and the new owner takes title to the property. Then, they will become the landlord until the lease is up.

I wish you the best in 2011.

Because I help people here, like you, for a living---this is not a hobby for me, and I sincerely XXXXX XXXXX abiding by the honor system as regards XXXXX XXXXX I wish you and your family the best in your respective futures.

Would you be so kind as to Accept my Answer so that I may be compensated for assisting you? Bonuses for greatly informative and helpful answers are very much appreciated. Thanks Again,

Doug