Foreclosure vs. Deed in Lieu vs. Short sale

DISCLAIMER: I am not an attorney.  I do not know if any of the following is true.  Proceed at your own risk.

First, determine if your distressed property is in a recourse state or non-recourse state by visiting the Nolo website or looking at this report from National Consumer Law Center.

In a recourse state

Approach Credit Lawsuit Taxes Other costs
Deed-in-lieu Low severity May be sued for deficiency. May owe taxes for deficiency Low: notary fee for DIL document
Short sale Medium severity May be sued for deficiency. May owe taxes for deficiency High: real estate transaction fees can be substantial
Foreclosure High severity May be sued for deficiency May owe taxes for deficiency Low: postage to mail keys to lender

In a non-recourse state

Approach Credit Lawsuit Taxes Other costs
Deed-in-lieu Low severity Can not be sued for deficiency. May owe taxes for deficiency Low: notary fee for DIL document
Short sale Medium severity Can not be sued for deficiency. May owe taxes for deficiency High: real estate transaction fees can be substantial
Foreclosure High severity Can not be sued for deficiency Deficiency amount is not taxable income Low: postage to mail keys to lender

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