1099 ~ Anyone Know About Them?
I am after a bankruptcy/preforeclosure that I want for my personal home. The home owner is cooperating in a HUGE way. He is a business owner whose business went belly up and took him with it. The home owner is willing to sell the house to us for the loan amounts, both of them. Our only fear is this:
Will he be taxed (1099) on the amount of debt forgiven in the short sale or payoff whichever happens. Countrywide says that he has accrued approx. $40,000 in debt with prop. taxes, fees etc.
My husband and I would be willing to pay the taxes for him if we can get a good enough price on the home. I don't really know how to go about getting this question answered.
Our other option would be to let the foreclosure process take place, and then buy it on the court house steps. My only fear is with the competition in the DFW area that it will get snatched away from me. Our current house is sold. We close on the 15th and will be moving into an apt. while we wait to see what will happen with this property.
Any thoughts or ideas?
I was told there is no way to avoided being 1099 for the debt forgivness. It's been a couple yr, so I don't know if that changed.
If he's btwen a rock and hard place, it's nice that you offer to pay the taxes, but unless it's a deal breaker I don't see why.
I agree w/ your assumption about what would happen at the court steps.
Debt forgiven is taxable and the lender is required to file a 1099 on any debt that has been forgiven. However, it sounds like he is selling it to you for the value of the debt, so I'm not sure where he would have any debt forgiven.
[addsig]
Yes, the IRS views forgiven debt as taxable income, but in short sale situations the 'income' is usually exempt from tax.
Besides, if the home is being sold for the amount of the loans... there is no short... and no forgiven debt.
[addsig]
I also found out that 1099's will be issued for the forgiven debt. However, if the homeowner is still in solvency that debt will be forgiven by the IRS on the tax return. So, for my homeowner it is not a problem.
To SSP, we are not paying off the full value of the load, we are offering a short sale to the "powers that be" in the BK dept. I have not read or heard of this happening before, but is what Countrywide wants us to do. We weren't able to get all our ducks in a row because neither realtor (I had my buyers agent help me to contact the homeowner b/c they no longer had a phone. She then contacted the realtor who previously had it listed before it went into BK she called the homeowner and had him sign a contract saying that she will get commission should we buy the house, then took the key, gave it to our realtor who then gave it to us. The homeowner and I have done all of the work from there. The two realtors that practically did nothing have DONE nothing since!! Mine said it was a lost cause, we wouldn't get it b/c it was in BK and theirs has just done nothing!!) will give us a value to put on the HUD 1 regarding realtors fees!! Any advice regarding this? I want to offer a flat fee, but don't know what is fair!! A percentage could be disastrous as we do not know how much the bank is going to make us come up from our starting offer.
Any ideas?
OHHHH!!
I understand where you all got "loan amount" from. Our plan is this:
1st mort. is 301K
+ 40 K in fees, taxes etc.
2nd mort is 42,8K
County appraised value is $382K (which just got it lowered to this amount by 60K last year)
CMA's are coming in around $435, but that is comparing properties sold with the same square footage. It doesn't include considerations for remodeling.
We plan on offering only 90 % of the 301
starting at 12% of the 42,8
We know that the bank is going to tell us no on our first offer, but find it a starting point. We don't want to pay for any of the accrued fees and taxes on the 1st.
The second was bought in a bundle from Countrywide and has not been accruing any interest b/c of a mistake in the way it was entered into the computer.
1. What do you all think we will be "settling" with the bank after all negotiations are done, in your experience?
We have two bids of recarpeting and painting both totaling around 30K. It currently has awful pink carpet and walls. (probably why it never sold while it was on the market for a year+)
An inspector will be picking it apart on Monday, which we plan on submitting as well.
To countrywide we will be submitting a formal short sale packet.
2. Fleet is just suggesting that we write on paper what we are willing to pay for the loan. That just sounds odd to me?!
3. I have read on these forum that you try to keep the first from knowing about the second. But what if the first held the second until it was sold away?
We are getting down to the nitty gritty here, and for someone that is buying this for a family home, not an investment ~ I am nervous. I have learned soooo much from this process and have respect for people that I don't really "know" I would love to keep pursuing these properties.
Please refer to the paragraph number when you are responding.
What about the bankruptcy. Was it a 7 or 13. Is the house already discharged?
Brenda
It was a 13 filing, the stay is in the process of being lifted on the property. He will be in BK for 18 more months