Where's The Justice?

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Real Estate Agent with Cactus Mountain Properties, LLC

SHORT SALE SCENARIO

I have a Seller who has gone into Default on their mortgage payments.  The current value of the home has dropped 50K below what is owed.  They are considering doing a short sale to redeem their credit before more damage is done.  After contacting the bank, Suntrust Mortgage, I have been told that they would consider all offers on the home as payment towards the pay-off.  The difference, however, would not be forgiven but still owed to the bank.   Here is the dilemma: let's just say the bank did forgive the difference and wrote the couple a 1099 for the amount forgiven.  They would have to claim it as phantom income on their tax returns and pay 32% back to the government for the gain. Does this make sense? Either way, it seems to be a lose - lose situation.  What am I not seeing? 

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Barb Merrill Works 4 U!

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Rainer
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Brandon Causey
Coastal Palmetto Realty LLC - Loris, SC
Realtor, Coastal Palmetto Realty LLC
This happens all the time, and I have yet to find a loophole out.  Talk to a tax attorney is all I can tell you...If you happen to find the answer Please post...I've seen this same topic on the rain at least 10 times without a decent answer...Share the knowledge
Sep 27, 2007 09:41 PM #1
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Rainmaker
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Barb Merrill

GRI, Associate Broker
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