What To Do When Buyer Defaults?

JohnCl profile photo

Hello All,

The buyer breaks their lease and loses their option consideraton. They do continue to pay rent (although late and piecemeal) and are actually clean and treat the house like a showcase home. They are planning to move but would like to wait until after the holidays. They have realized they can't afford the monthly payment and are planning to move. I am marketing the home while they are there. They have agreed to take care of the property and be ready to show it for a discount on their rent for this month. They do keep everything nice and ready to show.

Does notice need to be sent in writing (Certifed Mail) explaining to them that they have lost their down payment (it is never talked about)?

I need to show this as taxable business income this year. Any other way to provide proof of this taxable event besides this letter?

JohnCl

Comments(3)

  • LeaseOptionKing27th November, 2004

    I don't give a letter; if it's in the Contract (and I'm sure it is), a separate notice isn't necessary. The IRS will take you at your word concerning income, but you should always deposit it when received to support your 1040 should you be audited.
    [addsig]

  • JohnCl27th November, 2004

    LeaseOptionKing,

    Thank You. Makes perfect sense. I guess the IRS generally isn't worried about people reporting income.

    Gee. You mean I was actually supposed to deposit that check? grin

    JohnCl

  • loanwizard5th December, 2004

    I would think that even though they broke their lease this year, if they are not moving til after the holidays, or specifically Jan 1 2005, then technically they are still month to month tenants which would mean that the option money could be deferred to your 2005 return.... you never said what their option date was?

    Good Luck,
    Shawn(OH)

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