Short Sale Credit Consequences
I am trying to find out what the credit consequences are for a short sale vs. foreclosure.
I understand that on short sales the lender can 1099 or file defficency judgement. Can they do that on foreclosures?
I am looking for the reasons or advantages on why a seller would choose a short sale over foreclosure if there are no other actions after foreclosure.
I do realize that the short sale might be an opportunity for the seller to maybe get some cash but the consequences afterwards would make me think that they would rather have it behind them with foreclosure and nothing looming over them.
Please shed some light on this for me.
Thank you
comeback
Thank you for your reply. I would like to read your essay. Where do I find it at?
How does a short sale get reported on a sellers credit history? Does it have the same effect as a foreclosure?
Thank you
Thanks, Happy Holidays
mr ssp so you are saying that the foreclosure will be displayed on the homeowners credit file?
A foreclosure may result in the lender issuing a 1099A - see IRS publication 544.
On my preliminary payoff letter from US Bank on a SS I did with them in November, they stated: "please be advised we will send the U.S. tax form #1099c that is required by law to the Internal Revenue Service, notifying them of the foregiveness of our debt."
This was after I stipulated in the offer that no deficiency judgement or IRS notification be made. I just looked at IRS Pub. 544, and found the following:
"A lender who acquires an interest in your property in a foreclosure or repossession should send you Form 1099-A showing the information you need to figure your gain or loss. However, if the lender also cancels part of your debt and must file Form 1099-C, the lender may include the information about the foreclosure or repossession on that form instead of on Form 1099-A. The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. For foreclosures or repossessions occurring in 2006, these forms should be sent to you by January 31, 2007."
So how DO you get the lender to not send them a 1099 legally? This would be a great trick to know.[ Edited by loon on Date 01/02/2007 ]