PROPERTY DONE PROPERLY!

This previously bank-owned 3 year old 1800' ft ,4/2/2 repo needed  a little reconditioning, but was  quickly ready for resale, or rental, purchased for only $88K, yet appraised currently at $160K
                 

One of our many services includes property preparation for sale, in just a few days (if needed) we can update and improve your property and have it ready for sale  or for you to move right in!!!

        When the lender or bank accepts a short
sale on the property for less than what was
 owed, thena deficiency exists with the loan.
The deficiency is the difference between what
the homeowner owed and the amount the
property sold for.

       For example, Mr. Jenkins owes $300,000
on his home and the lender accepts a short sale
 for $200,000. There is a deficiency of
$100,000 for which the lender can then sue
the homeowner.
The key phrase is “can sue.” That is the right
of the lender. However, that is a practice that
almost never happens but, it is a real concern
for the homeowner. In most cases, the
homeowner wants nothing else to do with the
lender once the property is sold.

If the deficiency judgment is granted, it would
appear on the homeowners’ credit report just
as any other judgment would appear.

Will they be required to pay the difference?
During the short sale process, we will negotiate
with the lender to not seek a deficiency
judgment against the homeowner.

Some lenders as a matter of policy, will not
seek a judgment against the homeowner
because they feel they have waived their right
by accepting a short sale however, if you can
 get them to openly acknowledge they will not
seek a judgment; the owner will be more than
happy.

There is a second issue as it relates to the
deficiency and that is the 1099.

The lender will issue a 1099 to the homeowner
for the difference. In Mr. Jenkins'  case, the
lender will issue him a 1099 for $100,000.
This will have to be reported as income
Mr. Jenkins  had received and thus he would
have had  to pay taxes on the $100,000 as
though it was earned income.
          Upon successfully closing a short sale,
 lenders will always report a loss to the IRS and issue a 1099. However, the Mortgage Forgiveness Act
of 2007 was signed into law on 12-20-07 and is
now official, effectively getting rid of the
question “will I be taxed on the Short Sale”.
Prior to this action, forgiven mortgage debt
due to foreclosure, short sale, or deed in lieu
of foreclosure, was potentially taxable income
to the borrower. This was the subject of much
media attention and led to many questions and
 concerns from Sellers wondering whether or
not they were going to get “hit with taxes” on
the Short Sale. The new law, however,
temporarily waives these taxes for debts
forgiven (as high as35%) from the beginning
of 2007 to the end of 2009.

          This will effectively put an end to the
question from Sellers… will I be taxed on the
Short Sale discount. The definitive answer
 (at least until the end of 2009) is NO! For a
copy of the Mortgage Forgiveness Debt  Relief
Act of 2007, go to:

http://www.govtrack.us/congress/bill.xpd?bill=h110-3648 

or

http://www.whitehouse.gov/news/releases/2007/12/20071220-6.html 

         The bottom line here is that only Acquisition
funding can be forgiven by the Mortgage
Forgiveness Debt Relief Act of 2007.
Foreclosure, Deed in Lieu and Short Sales are
all treated the same in regards to taxes. Any
cancellation of debt is a taxable event except
for any acquisition funding for your primary
residence that you’ve lived in for the last 2
years. Everything else is taxable. However,
please see you tax advisor if you have a second
home or investment property that you are
considering a short sale on. You accountant
may advise you that you may have a loss on
this investment property that would offset any
gain. Please seek advise from your tax advisor.

In my dealing with lenders, we have found
that they generally will not seek a
deficiency judgment because of the hardship.
There are a couple of options that the
homeowner has as it relates to the deficiency
judgment. In Mr Jenkins’ case, he could file
bankruptcy to address the judgment or
could also short sale the deficiency with the
lender at a later date. In other words, offer
the lender a lesser amount as “payment in full.”

Here is an important note. The lender,
if they issue a 1099 cannot then sue for
a deficiency judgment. The lender can
only pursue one or the other. In other
words, Sellers can’t receive both a
deficiency judgment and 1099 from
the lender.

It is obviously in the best interest of the
homeowner to be proactive and deal with the
short sale before it becomes a foreclosure. At
least there is a chance that we can negotiate
away the deficiency before it even becomes
an issue.