| Has Anyone Had Any Success With A Short-Sale or Deed In Lieu I'm in the middle of a foreclosure and have attempted both a short-sale and deed in lieu of foreclosure. Both were wasted efforts. Has anyone had any success with either of these programs ? My Realtor is clueless regarding the current market. His/her advise/knowledge has been 180 degrees out, as compared to what common sense and an attorney have told me. It's to the point that if my Realtor tells me to do something, I do the opposite. It's obvious to me that the Realtor's only concern is maximizing their commission, even at my expense. |
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 bobrkYou kids get offa my lawnPremium
join:2000-02-02
San Jose, CA | I don't have any other advice besides get another Realtor. |
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 FutureMonKeep your Mitts off RMoneyPremium,ExMod 2002-05
join:2000-10-05
Seaside, CA | reply to Waterbug
There are realtors that specialize in Short Sales.
I had a short sale in Feb 2008. Basically you have to get the lender(s) to agree to take less than you owe, and the difference is 1099'd to you for that tax year.
For instance, lets say you have a 500,000 1st mortgage and you get an offer for 490k. Keep in mind that the buyer and seller commissions also have to come out. Typically 3% each ($14,700 * 2 = $29,400). That now means the lender will now have to agree to let the sale go forward for $460,600, and you'll get a 1099 for $39,400.
Same scenario as above, but with a 10,000 2nd mortgage ($510,000 total owed with a $490k offer):
The 2nd mortgage holder will take a 100% loss, and an additional $10,000 plus the $29,400 commission will come out of the 1st. You'll get two 1099's - one for $10k and another for $39,400. PLUS, you have to get both lenders to agree which can be difficult.
SOMETIMES the buying and/or selling agents will agree to reduce their commission to aid in getting the lender to approve the sale. However, this is rare.
- FM
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This just in from the department of redundancy department... |
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 lolwhatYou're getting warmerPremium
join:2001-06-11
PonziWorld
 ·Callcentric
| By the way, in this case, 1099 is shorthand for taxable income. In other words, get legal advice before going any further. You won't find such advice online.
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Tutto nelle banche, niente al di fuori delle banche, nulla contro le banche |
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| reply to FutureMon
I had a short-sale buyer that was supposedly prequalified for a VA mortgage. Bank approved the short-sale. Buyer required 60 day closing after short-sale approval, due to VA loan. Then the buyer walked a week before the closing date. Absolutely NO REASON was given. My only recourse is to try to claim the menial earnest money. A deed in lieu was underway but denied when the short-sale was approved. Now the foreclosure auction is too near for any significant action. |
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FutureMonKeep your Mitts off RMoneyPremium,ExMod 2002-05
join:2000-10-05
Seaside, CA | Damn that sucks... You really should consult an attorney. Was there a "buyers right to cancel" clause in your contract?
- FM
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This just in from the department of redundancy department... |
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 jester121Premium
join:2003-08-09
Lake Zurich, IL
·voip.ms
| reply to Waterbug
You'll receive a 1099 for the portion of the debt that's forgiven in the short sale, but it is generally NOT taxable income -- part of the HAMP/HARP was that if you are insolvent (and trust me, if this is your residence that you're short selling you are insolvent) you do NOT pay taxes on the deficiency.
You need someone with expertise in short sales, to also be sure the bank doesn't come after you in a few years to pay them back the deficiency. A properly-structured short sale gets you a fresh start, not counting credit report dings, and this isn't that difficult for someone who knows what they're doing. You need better representation. |
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FutureMonKeep your Mitts off RMoneyPremium,ExMod 2002-05
join:2000-10-05
Seaside, CA
1 edit | You have to prove the insolvency by providing an insolvency worksheet to the IRS, and they have to accept it.
It has to include ALL your assets and debts - including things like the # of shirts, pants, socks, shoes you own...and their typical value as if you were to buy them from a thrift shop. You have to include things like furniture, electronics, tools, and investments such as life insurance and 401k's too.
I was only able to reduce my short sale liability (aka taxable income off the 1099) down to about 14k - which was then treated as income on my returns...
- FM
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This just in from the department of redundancy department... |
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HesherPremium
join:2002-09-26
Sycamore, IL | reply to Waterbug
I personally won't list a short sale unless they have a real estate attorney that deals with the bank. Not because its a lot of work, but because it really pushes a gray area of me practicing law. I also don't do many short sales anyway, so in the best interest of my clients, I pull in an agent that specializes in them.....it may split my commission, but at least my client gets the representation they need and deserve.
Cover your butt and get a good attorney. A lot of times, the bank will cover most of their fees.
Also cover your butt and ask the agent how many short sale listings they've closed.
Sorry to hear about the headache. |
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| said by Hesher:I personally won't list a short sale unless they have a real estate attorney that deals with the bank. Not because its a lot of work, but because it really pushes a gray area of me practicing law. I also don't do many short sales anyway, so in the best interest of my clients, I pull in an agent that specializes in them.....it may split my commission, but at least my client gets the representation they need and deserve.
Cover your butt and get a good attorney. A lot of times, the bank will cover most of their fees.
Also cover your butt and ask the agent how many short sale listings they've closed.
Sorry to hear about the headache.
I had to sign a release that authorized the bank and my Realtor to exchange my financial information. The next day, my Realtor told me that I HAD to give the bank the following information: 1. Last 2 pay stubs. 2. Last 2 years federal tax returns (complete with ALL forms). 3. Last 2 months utility bills. 4. Last 2 months credit card statements. 5. All vehicle and loan payments. I thought WTF and called an attorney. He told me to get the information request in writing and he would respond on his letterhead. I told my Realtor what he said and the topic NEVER came up again. The bank approved the short-sale without any of than information. |
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FutureMonKeep your Mitts off RMoneyPremium,ExMod 2002-05
join:2000-10-05
Seaside, CA | When the sale goes through, just be prepared to receive a 1099-C from the lender.
Read up here: »www.irs.gov/publications/p4681/ch01.html
specifically the area that talks about insolvency...
- FM
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This just in from the department of redundancy department... |
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| said by FutureMon:When the sale goes through, just be prepared to receive a 1099-C from the lender.
As stated earlier, the buyer walked, a week from closing. If I get a 1099, it will be from the foreclosure. |
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 StockPost Watch these nuts in your mouth
join:2010-10-10 | said by Waterbug:said by FutureMon:When the sale goes through, just be prepared to receive a 1099-C from the lender.
As stated earlier, the buyer walked, a week from closing. If I get a 1099, it will be from the foreclosure. There is always bankruptcy protection since your credit is in the toilet anyway.
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Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
Warren Buffett |
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jester121Premium
join:2003-08-09
Lake Zurich, IL Reviews:
·voip.ms
| reply to FutureMon
This is the IRS pub that specifically talks about short sale/foreclosure 1099s and their exclusions under the 2007 act.
You must have had substantial other assets, or your short sale wasn't very short, to have $14K of debt forgiveness applied to your income. And if a CPA or lawyer actually told you to calculate the FMV of your shoes, socks, and shirts, you were terribly mis-informed. |
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FutureMonKeep your Mitts off RMoneyPremium,ExMod 2002-05
join:2000-10-05
Seaside, CA | loan balance was 548k
offer came in at 519k
subtract $30k from 519k for buyer & seller commissions
= $489k to lender
548k - 489k = $59k short
At the time after listing all my assets and debts together, I was $44k in the red.
59k - 44k = 15k I had to claim as income.
- FM
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This just in from the department of redundancy department... |
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1 edit | reply to Waterbug
Just an update on this ridiculous situation. Since my short-sale buyer walked, I have received his Ernest Money. I couldn't make a dime on the sale but made money on it's failure. Since then, the bank has delayed the foreclosure auction two times, with no explanation or even a notification. So far, there have been 6 different auction dates: 1. set at notice of foreclosure. 2. set when key in lieu applied for. 3. set on application for short sale. 4. set at short-sale approval because short-sale was for VA loan. 5. set when short-sale fell through. 6. set for some unknown reason.
The house is 8 months in arears and has been vacant that long. At this piont, I just want it gone. |
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