Where's The Justice?

By
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? 

Posted by

Barb Merrill Works 4 U!

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the airplane to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Comments 9 New Comment

Anonymous
Post a Comment
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the leaf to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Rainer
17,646
Gary Bland
Century 21 All Islands
What ever happened to the PMI insurance that many Buyers had paid for??  It is never fair.  Is there any way to get caught back up on payments.
September 27, 2007 09:49 PM
Anonymous #6
Anonymous
Anonymous
Paying the taxes on the forgiven debt is better than a deficiency judgement for $50,000.  The choice would be easy for me.
September 27, 2007 09:52 PM
Rainer
9,056
Chris Giddings
Realty Executives of Nevada

In a short Sale, if the homeowner can prove they are insolvent they can gain exemption from the IRS.

In other words, if they have no assets, (furniture TV etc are not included) and all liabilities, they may very well qualify.

Those in Bankruptcy are atomically exempt.

 

 

September 27, 2007 10:00 PM
Rainmaker
186,726
Barb Merrill
GRI, Associate Broker
Cactus Mountain Properties, LLC

Thank you, Chris, for the excellent information that will not only be helpful to me but to many other people out there who are trying to find solutions for overwhelmed home owners.

Much appreciated advise,  Barb

September 27, 2007 10:45 PM
Rainer
85,131
Lance Winslow
The Car Wash Guy
Yes, that indeed is the big controversy, even President Bush is thinking here with his team, this is a common scenario, more common than anyone wants to admit, except maybe a registered agent, combing thru tax returns during audits, because god help you if you let it go and don't pay it, because the IRS won't.
December 27, 2007 02:28 AM
Anonymous
Post a Comment
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the cat to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Rainmaker
186,726

Barb Merrill

GRI, Associate Broker
Ask me a question
*
*
*
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the pants to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Additional Information

Keeping well-educated on current market trends and issues is the best service I can give my clients. Whether a 1st time home buyer, a life change relocation, a 2nd home purchase or a seller which deserves the very best in negotiating skills enhanced by the information gained through blogging. The thriving economic enviroment of Arizona along with affordable housing is a welcoming home for everyone. This is what motivates me to provide excellence in the residential real estate field.