Shayan,Best option to avoid issues and stay risk free along with having a better approval chance would be to go with a Cash out refinance.

But you have to ask proactively, and be mindful of how long you stay in forbearance to avoid long-term credit issues.🔹 Insurance Challenges – Even when insurance pays, it rarely covers the actual cost to completely rebuild.

We are good friends but that's also not an issue for them because they are a dual veteran couple.

In my state the standard contract used by realtors addresses this issue by allowing the agent to check a box specifically to limit the seller to keeping the EMD as opposed to going after "liquidated damages" like that.

I've asked my clients a similar question and have developed tools for them to minimize this, but I find there are a few different types of clients.Manager managed - these folks have no issues as they simply upload their year end statement from their property manager, their 1098 mortgage statement and any other one-off expenses they may have paid for outside of the management company. 

A few days ago I found out about this article so it looks like a tenant is suing the property management we used as the my partners. https://www.kxxv.com/news/local-news/in-your-neighborhood/mc...

We manage a property that was having drain field issues for awhile, got estimates and had the owner approve one of the vendors.

He makes sure we maximize all deductions and have no issues.

If you have a self directed IRA there are no tax consequences (but potentially various other issues), otherwise you will be subject to tax at the highest dollar rate as well as penalties if you are under 59.5 

Obey TorahBest, Larry Cheshier That’s interesting Larry but the issue becomes interest rates to borrow the money wouldn’t make this a valid choice.