California tax law

You should really be asking these questions to your CPA or tax expert. A realtor shouldn't be answering these questions :) Figuring tax isn't always simple and each situation is different.

As a NON CPA or tax expert, I have been told that a deed in lieu carries the same tax consequences (and cancellation of debt) scenarios as short sale and foreclosure. Plus, know that a deed in lieu is not a given... and personally I've never seen a client be successful having a bank take their property back in a deed in lieu transaction. And I've had several to try that route.

I would be curious if anyone else here has... ??? Mostly because most banks have requirements that the property must be on the market a certain length of time, and usually it will sell (short) in that time. Plus, if you have a second or another encumbrance, it is usually a no, from the bank.

Not sure of the accuracy of this article, though it is noted to have been written by a California CPA. It is one that I've seen and read in the past: http://www.realestateinvestingtax.com/shortsale.shtml

Hi Catherine,

I had the bank take a Deed-in-Lieu about a year ago. You are correct that the property had to be on the market for three months. This was not an issue as the property had already been on the market nearly six months (chasing down the market with the wrong price). The crazy thing was that they turned down an offer for higher than the DIL accepted price, also the note was at that time $460 and the CMV was $365!

It took the bank three months to get the property back to market and it sold for $295K.