Q: I have a real estate investment property that is a single-family home in a country club community. I bought this property about two years ago at a below-market price and have done some significant rehab to it.

I finally got it rented, but the rent doesn't cover the mortgage. The house has been on the market for more than four months without any offers. I have had it priced about 10 percent below the recent appraised value and almost 20 percent below appraised value a year ago.

I'm considering doing a deed-in-lieu of foreclosure to the bank, but I'm trying to minimize or eliminate any affect on my credit score, which is about a 750. The bank cannot tell me how my score may be affected but said that it would be negatively affected.

They told me to call the credit agencies for more information. I called all credit reporting bureaus, and of them, was able to speak to a live person only at TransUnion. She offered no help other than stating that a computer figured all the scores on a variety of variables (which I already knew) and that no one there would be able to help me with any sort of estimate. She then said to "ask the bank" -- a full circle game.

I need to get rid of this white elephant to free up some credit and get it off my books and reduce my stress level. Do you have an estimate on how much a deed-in-lieu of foreclosure might affect my score? And do you have any suggestions on what else I may do to get rid of the property without taking more of a bath?

A: No one can answer your question specifically, as a piece of negative information affects each person's credit history differently because of all the other pieces of information in it.

There isn't a set 100-point or 150-point drop for a bankruptcy or deed-in-lieu of foreclosure. You don't necessarily get hit with a 50-point drop every time you're late paying a bill. Some of these negatives are cumulative, meaning that the point drops get steeper every time you do it, and some of them are based on length. For example, you'd get a sharper drop if you were 90 days late on a payment than if you were 60 days late.

Also, how the negative information is actually coded by the lender when the information is updated to your credit history is crucial.

Here's how credit scores are generally calculated, according to MyFico.com, the Web site owned by Fair Isaacs Corp., which invented the credit score: 35 percent of your score is based on your payment history; 30 percent is based on the amounts that you owe on your various types of loans; 15 percent of your score is the length of your credit history; 10 percent is new credit that you've opened; and the final 10 percent is based on the various types of credit used.

If your score is regularly around 750, a deed-in-lieu might knock that down significantly. It could be a 100-point drop, but it could be more. The methodology to computing a credit score is proprietary, but you have to assume that a major event in your credit history would have a major impact on your credit score.

Don't forget that you usually don't have a deed-in-lieu situation without other negative events reported on your credit history. For example, some lenders won't consider a deed-in-lieu unless you have failed to make your mortgage payments for several months. By not paying your mortgage for several months, your credit history will take a severe hit. Add to that a deed-in-lieu situation, and your credit history will be severely hurt by the time you walk away from the property.

But if you can no longer afford the property, you can't sell it, and the bank has agreed to take it back, that's all you can do. You should make sure that the bank reports the deed-in-lieu as "paid in full" so that your credit score doesn't suffer further.

As for selling your property, unfortunately, some real estate markets are in the worst housing market since the depression. Banks are now selling repossessed houses for less than half of what they were "worth" three years ago. Other than dropping your price further, stepping up your marketing efforts (including online video and photos), and making sure that everyone who sees the property knows what a great deal they are getting based on local comps, there is little you can do other than wait it out.

One positive note to your situation is that you have the property rented. While it certainly depends on where your property is located and how much rent you get and what other expenses you have, at least you have a tenant that is looking after the property and the rent can pay for some of the expenses for the property.

If you do find a buyer for the home and the buyer offers you less than what you owe on the mortgage, you may ask your lender to accept the money from the buyer to pay off the mortgage in full. This would be considered a short sale and could adversely affect your credit history, but should not be as bad a hit as failing to make your mortgage payments and then giving the property to the lender via a deed-in-lieu of foreclosure.

Q: Our real estate agent informed us that she has a buyer for our home at the full asking price. There is a stipulation that we must offer the house at the asking price to the buyer, not the other way around. Do you know anything about this practice and why it is used?

A: I think this sounds very curious. Is it possible that you have misunderstood the agent? Or, does this strange turn of events have to do with her representing both sides of the transaction?

Generally a buyer comes to a home, sees a home and decides to make an offer to buy the home. The buyer would draw up an offer to purchase, or a real estate contract or some other document that conforms to the local custom. Then the seller has an opportunity to accept the offer, reject the offer, or counter with an offer.

I think you might want to ask your real estate agent a couple of questions about this situation. The first question to ask is whether the buyers have a real estate agent or broker helping them out. If they don't, your broker may want you to put the contract together for the buyer to sign. The second question to ask if the buyer does have a real estate agent is why the buyer has not made the offer. If you don't get a clear answer, there might be something strange going on.

If you can't get some good answers from your agent, you should place a call to the managing broker of her firm to ask why the buyers aren't making or won't make an offer for your home. Depending on the answer, if your broker is representing both sides of the transaction, I might ask the managing agent to reassign you to another agent in the office or get the buyers assigned to another agent in the office.

If you and the buyer have different agents, each of you can have an agent represent you in the negotiations for the sale of the home. Having two agents involved in your situation could eliminate a possible conflict of interest. If the managing broker refuses to get involved, then that would make me think something extremely strange is going on.

At that point, you might want to hire a real estate attorney (no matter what state you live in) to help make sure that your interests are being represented in this transaction.

(Real estate agents, if you have a different explanation for why this practice might be used, or can shed light on a situation in which this happened, please e-mail me at my Web site, and I will print your responses in a future column.)

To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center.

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