Short Sale Creates Taxable Income??? One Other ? Plz Help
Im new to short sales, and have 3 questions.
1) Is it true that you can get in trouble for giving the owner of the property money after the closing? If i negotiate a short sale, find a buyer, and after the closing, give the owner some money to move on with their life, am I doing something illegal?
2) I have been told that the bank can sue the seller for a deficiency judgement.
3) I have also been told that they have to pay taxes on the amount short of full pay off.
Why the H*ll would anyone want to do a short sale with me if they can be sued for the short amout and also have to pay taxes on it? They dont have any money to begin with, they sure dont want the IRS coming after them.
Im looking for FACTS here folks, please help me out.
Sincerely,
rebloodhound[ Edited by rebloodhound on Date 06/30/2004 ]
1. No, in the way you've described it, it's not illegal. Just don't make that promise to the homeowner in writing.
2. That is true.
3. That is false. The Sellers will receive an IRS form 1099 for the amount of forgiven debt. While forgiven debt is viewed by the IRS as taxable income, in the majority of short sale situations, that income is exempt from tax.
Doughs be de fax.
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Ok, but from what I understand, the likelyhood of them pursuing a deficiency judgement is small, considering:
a) they agreed to it in the first place
b) why waste more money going after someone that has no money to begin with.
and concerning the tax situation, you said in the majority of situations ? What would be a situation where the person WOULD have to pay tax on the forgiven income?
Thanks for your time and info
What would be a situation where the person WOULD have to pay tax on the forgiven income?"
If the Sellers didn't meet the test the IRS uses to determine insolvency.
Ok, sounds good
Thanks sspro. I might be interested in your courses, pm me if you get a chance.
"Ok, but from what I understand, the likelyhood of them pursuing a deficiency judgement is small, considering: "
would that be an accurate statement?
I don't have a 'course' per se, just A Short Sale Primer... an insight into real estate acquisition, and the short sale technique.
With a proper foundation, you can 'build' just about anything.
Proceeds are dedicated to charity.
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Whooops, the whole thing should have read
"Ok, but from what I understand, the likelyhood of them pursuing a deficiency judgement is small, considering: "
Would that be an accurate statement?
"Ok, but from what I understand, the likelihood of them pursuing a deficiency judgement is small, considering "
Would that be an accurate statement?
Each mortgage loan servicer has it's own policy... policy that they are required to follow.
Just ask them during the preliminary interview.
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Ok, Im having problems here... lol. sorry about that.
"Ok, but from what I understand, the likelyhood of them pursuing a deficiency judgement is small, considering:
a) they agreed to it in the first place
b) why waste more money going after someone that has no money to begin with."
That is what I was attempting to italicize and quote. Sorry, Wednesday are my monday.
I guess what Im really beating around the bush about is, in your experience, (assuming you have done a considerable number of SS's) how often does the bank persue a deficiency judgement?
Second mortgagees are more likely to pursue a deficiency... and a few will not budge from that requirement.
Much depends upon the strength of your Proposal.
The mortgagee is seeking to collect as much as possible... you are seeking to pay as little as possible.
Whoever has the better argument... wins.
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