Good afternoon Mike
Thanks for the additional information. I fully understand and I empathize with the situation you are in. First, there are no good alternatives to the situation that you are in. But you are in a better position than most considering walking away.
I might suggest that you lower the rental price to anything that will get a tenant in there, because while you work to get rid of the place, some money is better than none at all.
What you seem to be looking for is what is known as a strategic foreclosure. While I generally don't offer much hope that a lender will take a deed in Lieu, in your case, because the property is not upside down, I thing that there is a much better chance for you to avoid the problems associated with a foreclosure.
While it is rare that deeds in lieu are acceptable to the lender--- because the lender is not in the business of buy and selling property---but in making loans and collecting money, if they see that they may actually avoid losing money, they many times will accept it. Be sure to get an agreement that they will waive and claim for losses associated with their acceptance of the deed in lieu.
Another possibility is a short sale---meaning the lender takes less than what is owed. However, keep in mind that 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 at the time you receive the 1099, you are insolvent---meaning that your debts, including the debts on the property, equal more than the total assets you own, then the IRS will not require that you pay tax on the money written off and represented by the 1099s you receive from the mortgage lenders.
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.
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I wish you the best in your future.